By Jeff Carlson
A bipartisan retirement bill approved last year by the House of Representatives’ Ways and Means Committee will come to the House floor for a full vote during the week beginning March 28, a Democratic staff member confirmed.
The Securing A Strong Retirement Act of 2021 (H.R. 2954), often referred to as SECURE 2.0, received unanimous support when approved by the Ways and Means Committee on May 5, 2021. The goal of the bill is to increase retirement savings and simplify and clarify retirement plan rules.
The bill builds on the Setting Up Every Community for Retirement Enhancement (SECURE Act PL 116-94) signed into law in December 2019 to improve retirement savings opportunities for workers. If approved by the full House, the bill would move to the Senate for final approval.
Highlights of the bill include:
Expanding automatic enrollment in retirement plans. The bill requires 401(k) and 403(b) plans to automatically enroll participants upon their becoming eligible (and employees may opt out). The initial automatic enrollment amount is at least 3% but no more than 10%. And each subsequent year the amount is increased by one percentage point until reaching 10%. There is an exception for small businesses with 10 or fewer employees, new businesses (those that have been operating for less than three years), church plans, and governmental plans.
Indexing IRA catch-up limit. Under current law, the limit on IRA contributions is increased by $1,000 (not indexed) for individuals who have reached age 50. The bill indexes such limits starting in 2023.
Higher catch-up limit to apply at age 62, 63, and 64. Under current law, employees who have reached age 50 are permitted to make catch-up contributions under a retirement plan in excess of the otherwise applicable limits. The limit on catch-up contributions for 2021 is $6,500, except in the case of SIMPLE plans, for which the limit is $3,000. Section 107 of the pending legislation would increase these limits to $10,000 and $5,000 (both indexed) for individuals who have reached ages 62, 63, and 64 but not 65.
Increase in age for required beginning date for mandatory distributions. Under current law, participants are generally required to begin taking distributions from their retirement plans at age 72. The bill increases the required minimum distribution age further to 73 starting on January 1, 2022—and increases the age further to 74 starting on January 1, 2029, and 75 starting on January 1, 2032.
SIMPLE and SEP Roth IRAs. Generally, all plans that allow pretax employee contributions also are permitted to accept Roth contributions with one exception—SIMPLE IRAs. 401(k), 403(b), and governmental 457(b) plans are allowed to accept Roth employee contributions. The bill’s Section 601 would allow SIMPLE IRAs to accept Roth contributions as well.
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