Members of the Ways and Means Committee of the U.S. House of Representatives have released a proposed retirement reform legislation called the Securing a Strong Retirement Act of 2020.
The proposed legislation was introduced by Ways and Means Committee Chairman Richard Neal, D-Massachusetts, and Ranking Member Kevin Brady, R-Texas.
As the pair explain, the proposed legislation builds in various ways upon the landmark Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law in December and was the most comprehensive retirement security legislation in more than a decade.
Though it will take some time for the retirement planning industry to digest the proposed legislation, early feedback has been positive, reflecting the reactions to the initial publication of the SECURE Act last year.
“Our country is facing a retirement savings crisis that has been compounded by the economic impact of the COVID-19 pandemic,” says Financial Services Institute (FSI) President and CEO Dale Brown, noting that his organization is still digesting the sizable proposal. “It is promising to see continued interest in Congress to address this critical issue, and we applaud the committee leadership’s bipartisan approach. We look forward to working constructively with lawmakers to ensure this crucial legislation effectively assists Main Street Americans’ ability to achieve a financially secure retirement.”
“Congress is demonstrating once again that retirement security is a bipartisan issue in which leaders from both political parties focus on solutions to benefit workers and retirees,” adds Wayne Chopus, president and CEO of the Insured Retirement Institute (IRI). “We are very appreciative of the leadership, hard work and commitment of House Ways and Means Committee Chairman Richard Neal and Ranking Member Kevin Brady to introduce this legislation to help workers and retirees save more so they can enjoy a financially secure and dignified retirement.”
Chopus notes that the IRI has been advocating for many of the points included in the Securing a Strong Retirement Act, including the provision to increase the qualified plan required minimum distribution (RMD) age to 75, the elimination of barriers to allow greater use of lifetime income products, the expansion of retirement savings opportunities for nonprofit organization employees and the creation of greater clarity for startup tax credits that incentivize small businesses to join multiple employer plans (MEPs) and pooled employer plans (PEPs).
Chris Spence, managing director of federal government relations at TIAA, also hails the legislation, while expressing some caution.
“TIAA applauds Chairman Neal and Congressman Brady for today’s introduction of the Securing a Strong Retirement Act of 2020,” he says. “This bipartisan legislation will build on the important retirement reforms set in motion by enactment of the SECURE Act, which passed last year. While we are just beginning our review of the legislation, TIAA is supportive of a number of proposed measures that will address today’s retirement security challenges. We believe that as Congress works to refine this bill, ultimately, it will improve the retirement readiness of Americans and help millions attain a secure financial future.”
A preliminary analysis suggests the legislation is indeed ambitious and a potentially worthy successor to the highly popular SECURE Act. Among many other provisions detailed across some 130 pages of text, the legislation proposes expanding automatic enrollment in retirement plans, simplifying and increasing the saver’s credit, enhancing 403(b) plans, expanding automatic enrollment in retirement plans and indexing the individual retirement account (IRA) catch-up limit. Other sections address the treatment of student loan payments as elective deferrals for purposes of retirement plan matching contributions, while others describe a new military spouse retirement plan eligibility credit for small employers.
An early summary provided by the American Council of Life Insurers (ACLI) highlights the following goals of the legislation:
- Promote savings earlier for retirement by enrolling employees automatically in their company’s 401(k) plan, when a new plan is created;
- Create a new financial incentive for small businesses to offer retirement plans;
- Increase and modernize the existing federal tax credit for contributions to a retirement plan or IRA (the saver’s credit);
- Expand retirement savings options for nonprofit employees by allowing groups of nonprofits to join together to offer retirement plans to their employees;
- Offer individuals 60 and older more flexibility to set aside savings as they approach retirement;
- Allow individuals to save for retirement longer by increasing the required minimum distribution age to 75;
- Allow individuals to pay down a student loan instead of contributing to a 401(k) plan and still receive an employer match in their retirement plan;
- Make it easier for military spouses who change jobs frequently to save for retirement;
- Allow individuals more flexibility to make gifts to charity through their IRAs;
- Allow taxpayers to avoid harsh penalties for inadvertent errors managing an IRA that can lead to a loss of retirement savings;
- Protect retirees who unknowingly receive retirement plan overpayments; and
- Make it easier for employees to find lost retirement accounts by creating a national, online, database of lost accounts.