Congress May Poach Retirement Benefits to Pay for 2025 Tax Cuts

To prevent delay by Senate filibuster or persistent amendments, the tax changes will be made by the fast-track “budget reconciliation” legislative process, which is subject to strict rules and will effectively require most of the tax cuts to be paid for by some form of revenue raising or by cutting spending.

So while some of us in recent months were busily assembling drafts of further proposals to improve the retirement system — a possible “Secure 3.0” — what matters most in Congress is that the majority is focusing elsewhere: on the tax cuts and how to pay for them.

The White House and impending congressional majority are also considering certain spending cuts. But because those probably would offset some, but not all, of the intended tax reductions, Congress seems likely in 2025 to remain ravenous for revenue.

Apart from revenue raisers, could other retirement provisions hitch a ride on the anticipated budget reconciliation and tax cut vehicle? Perhaps a few. But many plan sponsors and their recordkeepers, asset managers, and advisors are still digesting Secure 2.0 and aren’t overly keen on having to process another round of retirement changes quite so soon.

Moreover, without judicial Chevron deference to regulatory guidance, the reliable, reasonable and timely administrative guidance the retirement system needs to confidently interpret and apply new legislation may be increasingly hard to obtain.

In any event, given the need for revenue and the strict rules governing budget reconciliation (which could, among other things, preclude amendments to ERISA, as opposed to the tax code), a substantial Secure 3.0 package in 2025 is not looking likely.

Mark Iwry is a nonresident senior fellow at the Brookings Institution in Washington. He was head of national retirement policy during the Obama-Biden administration.