Now that the most unorthodox presidential election our country has ever seen is over and President Trump has been sworn into office in January, it’s time to take a look at his position on key issues and the possible impact on your overall benefit strategy.
Let’s review the critical benefit issues:
DOL FIDUCIARY INVESTMENT ADVICE RULE IMPLEMENTATION
What Could Happen: Although the President has remained silent on this issue, one of his close advisors does not support the Department of Labor (DOL) Fiduciary Investment Advice Rule, which requires retirement investment advisors to act in the best interest of the investor. There is reason to think that the Trump administration, with the support of Congress and many trade organizations, may delay its April 10, 2017, effective date. To do this, the administration could employ a variety of actions, including new agency rulemaking or the publication of an interim final rule, but not executive action because the rule is already final. The timing of any delay or change is highly uncertain.
Fidelity’s Point of View: Fidelity has advised its workplace clients that we will provide advice to participants, and is busy implementing all the necessary changes to comply with the rule’s April 2017 effective date. In Washington, Fidelity will continue to offer Congress and the DOL feedback to help ensure regulations that do not create roadblocks to investors’ financial and retirement goals.
AFFORDABLE CARE ACT REPEAL AND SOCIAL SECURITY
What Could Happen Regarding the Affordable Care Act: While President Trump campaigned on a promise to “repeal and replace” the Affordable Care Act (ACA), there is strong support for retaining certain provisions of the seven-year-old law, including maintaining coverage for those with preexisting conditions and allowing dependent children to continue on their parents’ health care plan until age 26. President Trump has expressed strong support for consumer-driven health care options, such as health savings accounts (HSAs), leading many to speculate that he may propose expansions to HSAs.
With 48 Democratic votes in the Senate, Republicans will find it difficult to come up with the 60 votes needed to overcome a Democratic filibuster of the ACA legislation. As a result, Republican leaders have said they will likely use a budgetary process called “reconciliation,” which would allow them to pass legislation with only 51 votes. Republicans successfully used the reconciliation process to pass an ACA bill earlier this year, but the bill was vetoed by President Obama. Democrats used the reconciliation process to pass ACA in 2010.
What Could Happen Regarding Social Security: During his campaign, President Trump pledged not to cut Social Security benefits for existing workers. However, he suggested that his administration would begin examining the changes needed to keep Social Security solvent for future generations.
What Could Happen: During the campaign, President Trump issued a plan to reform the tax code in an effort to stimulate the economy and create jobs. His plan would reduce the number of individual income tax brackets from seven to three and lower the top income tax rate from 39.6 percent to 33 percent. The plan would also reduce the corporate income tax rate to 15 percent and eliminate certain business tax deductions. Trump’s plan would likely increase the federal deficit, but key Congressional Republicans have said that tax reform must be deficit neutral. Congressional Republicans have proposed offsetting the cost of tax reform by eliminating or capping numerous tax preferences. They have proposed maintaining tax incentives for home ownership, retirement saving, and charitable giving, but suggested that these tax benefits could be modified. Republicans have not ruled out using the budget reconciliation process to pass tax reform if they cannot secure bipartisan support. Even with a Republican in the White House and Republican control of both the House and the Senate, it is still too early to tell whether all parties can come together to advance a comprehensive tax reform package.
What Did Happen: On November 22, a federal district court judge granted a preliminary injunction delaying a DOL regulation that would have extended overtime protections to four million American workers. Slated to go into effect on December 1, the rule would have qualified all workers who make from $23,660 to $47,476 for overtime pay regardless of their duties. President Trump may ultimately decide the fate of the overtime rule by choosing not to appeal the court ruling or by looking for a way to work with Congress to overturn the employee-friendly regulation.
Time will tell whether workplace issues, which were not a significant element of Trump’s winning message to American voters, will receive any consideration by the President and the incoming Congress. In the interim, Fidelity will continue to monitor developments in these and other areas of interest to our clients. Should you have questions on a particular issue, please contact your Fidelity Representative.