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Federal Tax

Retirement Reform Hits Paydirt in Omnibus Bill

Tim Shaw  

Tim Shaw  

After two years of negotiations and fine-tuning, the Securing a Strong Retirement Act of 2022, or SECURE 2.0 Act of 2022, is closer to becoming law than ever after the retirement and pension package was included in Congress’ 2023 spending bill unveiled in the early hours of December 20.

Doubts were cast over SECURE 2.0’s chances of getting attached to the last-minute omnibus spending bill to set next year’s funding and prevent a government shutdown, the Consolidated Appropriations Act, 2023. It was initially believed that the 117th Congress could punt on retirement reform and use the remainder of the lame duck session to focus on tax extenders, aspects of the Tax Cuts and Jobs Act, and extending the expanded child tax credit.

Instead, the House version approved in spring was incorporated with aspects of Senate modifications seen in the Enhancing American Retirement Now Act and the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act. Among the wholesale changes to laws governing retirement plan rules are a new tax credit for some small employers of military spouses, a set 50% saver’s credit, and an increased three-year small employer startup credit. For more on the specifics of the package, see the Senate Appropration Committee’s summary.

“This is a good day for Americans who are working towards retirement and in retirement,” Josh Caron, vice president of federal affairs at Finseca, an organization of financial security professionals whose 6,000 members provide insurance and retirement planning services. Caron, Finseca’s boots-on-the-ground advocate on the Hill, said SECURE 2.0’s inclusion in the omnibus bill is the result of “a lot of really good conversations with folks at the leadership table” over the past two weeks.

This culminates two years of the organization working with tax writers in the House Ways and Means Committee and the Senate Finance Committee, as well as the Senate Health, Education, Labor and Pensions Committee. They joined a coalition of intitutions in the industry in petitioning party leaders in a November 17 letter to prioritize retirement before the end of the year.

“The components of SECURE 2.0 will encourage more employers to offer opportunities to save for retirement at work, make it easier and less costly for small businesses to offer retirement plans, and help ensure retirement savings last a lifetime,” read the letter.

The turnaround time for SECURE 2.0 was much faster than the 10 years of negotiations leading up to the passage of its predecessor, SECURE 1.0, also included in a year-end spending bill and signed by President Trump in December 2019. Caron said there was “broad bipartisan agreement” over the necessity of improving access to quality, money-saving plans. He chalked up SECURE 2.0 coming to fruition in two years as a reflection of the reality that taxpayers have needed help from lawmakers with their financial security, especially retirement.

Caron said there was an urgency for the 117th Congress to “strike while the iron is hot” and seize the opportunity to capitalize on a retirement consensus. Beyond the typical uncertainties that come with the changing of the guard at the committee leadership level whenever a new Congress is set to take over, this month’s negotiations were emboldened by the looming retirements of Republican Senator Rob Portman of Ohio and Ways and Means Ranking Member Kevin Brady of Texas.

“They’ve been champions in the retirement space for a number of years now, and we wanted to make sure their expertise, their hard work was reflected in a final piece of legislation as they exit Congress,” Caron said. He also credited Ways and Means Chair Richard Neal, Democrat of Massachusetts, as well as Senate Finance Committee Member Ben Cardin, a Democrat from Maryland, for their roles in the process in recent years.

According to Caron, the timing is right considering economic hardship factors impacting taxpayers’ ability to financially plan, such as the COVID-19 pandemic and rising inflation. He said that many Americans are worried about their ability to retire and question whether to return to the workforce or find a second job. Teasing the possibility of a possible SECURE 3.0, he said there is still more work left to do, but there is reason to celebrate now.

“A lot of what is in this bill is about helping folks save earlier, helping folks save more, and making sure they don’t outlive their money,” said Caron. “If you’re somebody who’s on the younger side of the spectrum, this bill is definitely going to provide lots of tools for you to be able to do that and make your retirement secure when you get there.”

 

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