The U.S. House of Representatives, passed a sweeping retirement reform bill on a floor vote of 415-4 on Tuesday, March 29, 2022. The Securing a Strong Retirement Act (HR 2594), hailed by some as “SECURE Act 2.0”, if enacted, will make significant changes to both retails savings solutions such as IRAs as well as employer-sponsored savings arrangements such as SEPs, SIMPLEs and 401(k)s.
Although it remains unclear precisely how the Senate will respond to the recently passed House legislation, there appears to be broad bipartisan support within the Senate for tackling comprehensive retirement reform legislation.
Some of the most significant provisions included in the recently passed House bill includes the following provisions.
- Increases the small retirement plan start-up credit, setting the credit at 50%, rather than having the percentage decline as income increases and increases adjusted gross income levels.
- Requires the Treasury Secretary to take steps necessary and appropriate to increase public awareness of the Saver’s Credit.
- Changes the required beginning date for RMDs from age 72 incrementally to begin at age 73, then 74 and finally to age 75.
- Indexes IRA catch-up contributions for cost-of-living increases.
- Provides an additional amount for catch-up deferral contributions for participants of certain employer retirement plans who are ages 62, 63, and 64.
- Permits employers to match employee student loan payments with a contribution to the employee’s retirement plan, such as a 401(k) plan.
- Allows employers to provide small and immediate financial incentives to join and contribute to retirement plans, including 401(k) and 403(b) plans.
- Removes RMD requirements for certain Life Annuities.
- Directs the Secretary of Labor to issue guidance that would allow plan administrators to use an alternative method for benchmarking target-date funds.
- Reduces the excess accumulation penalty.
- Increases the qualifying longevity annuity contract (QLAC) RMD exemption.
- Expands the EPCRS program to cover IRA errors as well as employer sponsored plans.
- Requires the Secretary of Labor, the Secretary of the Treasury, and the Secretary of Commerce, in cooperation, to create an online searchable database known as the Retirement Savings Lost and Found (the “Lost and Found”) to find missing participants.
- Indexes for cost-of-living adjustments the amount eligible for qualified charitable distributions.
- Places a statute of limitations on assessments of IRA penalties when the taxpayer files his or her individual tax return.
- Limits the repayments of qualified birth or adoption distributions to a three-year period. Permits the plan administrator of a section 401(k) plan or a section 403(b) plan to rely on the employee’s certification. of a distribution due to an employee hardship, the plan administrator of a section 401(k) plan or a section 403(b) plan may rely on the employee’s certification.
- Provides for domestic abuse victim distributions that would allow a domestic abuse victim to withdraw the lesser of $10,000 or 50 percent of their account without being subject to the 10 percent early distribution penalty tax. Domestic abuse victim distributions could be repaid to the plan over three years.
- Modifies the disqualification rule that applies when an IRA owner or beneficiary engages in a prohibited transaction so that only the portion of the IRA that is used in the prohibited transaction is treated as distributed to the individual.
- Modifies Simplified Employee Pensions (SEPs) and SIMPLE IRAs so that they could be designated as Roth IRAs, so that contributions to a SEP or SIMPLE IRA that is a designated Roth IRA would not be excludable from income (employer contributions as well as elective deferrals).