In late November, House Ways & Means Chairman Kevin Brady (R-TX) unveiled a package of tax extenders and technical corrections to last year’s landmark tax reform legislation. Included in the bill is a pension provision that will make it easier for manufacturers to offer competitive retirement benefits to their employees.
When companies transition from a traditional defined benefit (DB) pension plan to a defined contribution (DC) 401(k) plan, many businesses grandfather longer service employees into the existing DB pension and offer the new 401(k) only to new employees. This allows existing employees to remain in their long-standing pension plan as they near retirement.
This approach, called a “soft freeze,” allows companies to provide competitive retirement benefits to all employees, regardless of their tenure. However, over time these plans can trigger IRS nondiscrimination rules as the employees in the DB plan continue to increase in both time served and compensation relative to the newer employees in the DC plan. This can lead to companies being forced to institute a “hard freeze” on the plan, meaning that employees miss out on their prime years of benefit accruals.
Chairman Brady’s legislation provides an alternative solution that would modify the nondiscrimination rules to allow plan sponsors to protect grandfathered employees when transitioning from a DB to a DC plan structure. Provided that the plan does not violate any nondiscrimination rules when it is set up and no significant changes are made going forward (other than changes in employees’ employment status and/or compensation), it would not violate nondiscrimination rules as the longer service DB employees advance through their career.
This targeted reform would prevent companies from unintentionally violating the nondiscrimination rules, allowing manufacturers to compensate employees competitively and attract talent in a tightening job market. The NAM signed a coalition letter supporting this change, which is modeled after bipartisan legislation introduced by Reps. Pat Tiberi (R-OH) and Richard Neal (D-MA) and Sens. Rob Portman (R-OH) and Ben Cardin (D-MD). The NAM will continue to advocate for this important reform as the tax bill moves through Congress.
The countdown clock has begun for the Chemical Facility Anti-Terrorism Standards (CFATS) program, as it will sunset on January 18, 2019 — unless Congress acts first to reauthorize it. Unfortunately, with Congress set to adjourn in a matter of weeks and a limited number of days remaining on the legislative calendar, manufacturers are becoming increasingly concerned that CFATS will lapse and our nation’s security will be at risk. This is an issue of critical importance to the NAM: our members operate 2,152 CFATS-regulated facilities spanning a range of major industrial sectors — such as oil and gas refining; chemical production and distribution; mining; agricultural goods and services; and electrical utilities — and they are counting on Congress to act expeditiously and reauthorize this program without delay.
Operated by the Department of Homeland Security (DHS), the CFATS program relies on a multitiered risk assessment process to identify and regulate high-risk facilities. DHS ensures that CFATS-regulated sites have appropriate security measures in place to mitigate, prevent and protect against terrorist exploitation. Since its inception in 2007, CFATS was tied to short-term appropriations measures, which prevented Congress from making statutory improvements to the program. However, the four-year congressional authorization of CFATS in 2014 was a pivotal moment for the program’s longevity. Manufacturers were provided with the regulatory certainty needed to make long-term security investments, and it enabled DHS to run the program more effectively. Now is the time to pass a full reauthorization once more for this vital program—and there are multiple different proposals already introduced in both chambers of Congress to do so:
- Senate: Ron Johnson (R-WI) is committed to moving the Protecting and Securing Chemical Facilities from Terrorist Attacks Act of 2018 (S. 3405) forward by regular order and is engaged in negotiations with his colleagues. The bill reflects the NAM’s top three reauthorization priorities that we asked for during the Senate Homeland Security and Governmental Affairs Committee (HSGAC) roundtable in June. The legislation would reauthorize the CFATS program for five years, provide needed certainty to the regulated community and enhance the security of our nation. The Senate HSGAC favorably approved S. 3405 on September 26.
- House: The House also has two CFATS reauthorization bills in play. On September 28, Reps. John Katko (R-NY), John Moolenaar (R-MI) and Henry Cuellar (D-TX) introduced a bipartisan bill similar to S. 3405. The NAM joined with the CFATS Coalition and sent letters to Johnson and Reps. Katko, Moolenaar and Cuellar for their leadership on this important issue. In addition, on November 29, House Homeland Security Committee leadership and Energy and Commerce Committee leadership introduced legislation that would reauthorize CFATS for two years.
Securing the homeland requires strong partnerships among government at all levels, the private sector and concerned citizens across the country. Action to support these partnerships is needed now. CFATS reauthorization is and should continue to be a bipartisan issue that lawmakers on both sides of the aisle work on together to achieve. Security will remain a top priority for manufacturers, and they are dedicated to protecting their facilities and the communities in which they live and serve. Manufacturers call on Congress to reauthorize the CFATS program without delay for the sake of our nation’s national security.
Congress and the SEC must take steps to bring oversight and reform to the proxy firm industry.
From cutting edge advancements in automobile production to lifesaving developments in medical devices and medicines, Michigan manufacturers are global innovators and at the top of their game. As detailed in the NAM’s recent economic analysis, the manufacturing industry in Michigan spent $17.2 billion on R&D in 2015 – ranking it 4th nationally. One key to this success is ensuring all manufacturers’ intellectual property rights continue to be protected.
Unfortunately, legislation currently being debated in Lansing threatens manufacturers’ intellectual property protections. House Bill (HB) 5223, a proposed drug pricing transparency bill, would require manufacturers that distribute prescription medicines in Michigan of a certain cost to submit a substantial amount of proprietary data, including costs associated with research and development (R&D), to the state Department of Health and Human Services, with no protections for the data submitted.
Manufacturers understand the need to reduce health care costs, but we have serious concerns related to the long-term implications of pharmaceutical transparency proposals. Protection of trade secrets and other forms of intellectual property are a fundamental necessity for manufacturers to succeed in today’s intensely competitive global marketplace.
The latest proposal in Michigan sends a wrong signal to the researchers, inventors and innovators who constitute the manufacturing community in Michigan and the rest of the nation who are constantly thinking of new ways to innovate, grow their businesses and serve their customers. For the biopharmaceutical industry, this kind of so-called “transparency” legislation would stifle innovation and impede the ability of companies to bring new, life-saving medicines to market all while failing in its intent to contain health care costs.
Policymakers in Michigan and at the federal level should work to create opportunities that help innovators attract and retain investment. The NAM opposes any efforts that invalidate longstanding intellectual property and trade secrets protections, and force manufacturers of medicines to heed new government-driven demands that are contrary to basic free market principles.
The manufacturing industry employs over 604,500 Michiganders in high-skilled and high wage jobs – the nation’s third highest manufacturing state measured by employment. State lawmakers who value these critical jobs and the state’s innovative manufacturing sector should reject the proposed legislation.
The simple question that should be asked during each opportunity to consider a health care reform proposal should be, “at what expense?”
Next Thursday, November 15, the Securities and Exchange Commission (SEC) will hold a roundtable on the proxy process. This is an opportunity for the SEC to solicit input from a variety of stakeholders on whether proxy advisory firms work in the best interest of Main Street investors. The roundtable is a critical step in the review process to determine if reforms to the existing rules are necessary to protect Americans’ retirement accounts.
Ahead of the roundtable, the National Association of Manufacturers (NAM) and the U.S. Chamber of Commerce have launched a major initiative to educate Main Street investors in 401(k)s and pension plans on the dangers posed by proxy advisory firms. A digital and print campaign, backed by a significant six-figure investment in print and social media ads, aims to ensure that retirees and those saving for retirement have their voices heard on this serious threat to their futures.
The retirement income of millions of Americans and the performance of the public companies in which they’ve invested their savings are affected by a little-known but powerful group of firms whose influence is gaining overdue attention. Proxy advisers provide recommendations on shareholder proposals despite having little regulatory oversight, and two companies, Institutional Shareholder Services (ISS) and Glass-Lewis, control about 97 percent of the proxy advisory market. These firms lack oversight and can provide bad advice, based on inaccurate numbers or politically motivated agendas, that impacts your retirement savings.
It’s critical that hardworking Americans understand how their retirement savings are being put at risk by largely unregulated entities that operate with little transparency and provide advice that can be tainted by conflicts of interest. The business community has long advocated commonsense corporate governance reforms, including greater oversight of proxy advisory firms. These ads are indicative of the significance with which manufacturers view this issue. The NAM has also submitted a formal comment letter to the SEC outlining our proposed reforms.
The U.S. Chamber Center for Capital Markets Competitiveness (CCMC) recently issued two reports examining how the influence of proxy advisers continues to place undue challenges on businesses and investors. Its 2018 proxy season survey found a minority of companies believe advisory firms adequately researched issues on which they issued advice. And its examination of so-called “zombie” proposals showed the toll that repetitive, failing proposals—often supported by proxy advisers—take on companies and their shareholders.
The ad campaign will help those most threatened by the growing power of proxy advisers to learn more and have their voices heard. Ad samples and additional information can be found at www.proxyreforms.com.
Getting trade right is not just a theory: the very success of American manufacturers from Boise to Buffalo depends on a strong trade agenda. Manufacturers in the United States have already been able to benefit substantially from global economic growth—including record international levels of demand among the 95 percent of consumers who live outside of our borders for high-quality consumer and durable manufactured goods—thanks in large part to trade agreements that lower barriers and enforce fair rules of the road for commerce. In fact, U.S. manufacturing output and exports have quadrupled over the past 25 years as a result of these types of agreements and policies. Yet, despite that growth, major barriers remain that continue to hold back even greater success for our nation’s manufacturers.
That’s why, in a detailed written submission filed yesterday, the National Association of Manufacturers (NAM) called on the U.S. government to tackle trade barriers confronting manufacturers in markets around the world.
The NAM’s submission explains that despite the major success manufacturers in the United States have enjoyed in the global marketplace, a host of barriers—from unfair import policies to weak enforcement of intellectual property (IP), from investment barriers to technical barriers to trade—place real roadblocks to expanding U.S. manufacturing, particularly in markets such as China and India. This year’s submission includes those two countries along with Brazil, Indonesia and Russia among its top-priority countries across a range of issues. The submission also targets additional countries and regions for more focused concerns on specific issues, such as Canada (for IP enforcement), Colombia (IP enforcement) and the European Union (technical barriers to trade).
Recent developments involving top trade issues such as the new United States-Mexico-Canada agreement and China trade tensions underscore just how important strong, trading rules that open markets are for manufacturers in the United States, large and small. From negotiating new high-standard market-opening trade agreements, to fully enforcing existing trade and investment agreements, to working with allies and partners to strengthen international trade-related rules at the World Trade Organization, there’s a lot our government officials can do to expand trade and investment opportunities for manufacturers that will support economic growth, high-wage jobs and a fair playing field.