I wanted to cover a brand new bill, focused specifically on improving retirement benefits for seniors. The Securing a Strong Retirement Act, also called the Secure Act 2.0, was approved on Tuesday with a bipartisan vote of 414-5. And at this point, the legislation is headed to the Senate for further discussion and review. Now according to the House Ways and Means Committee Chairman Richard Neal of Massachusetts, “This bill will help all Americans successfully save for a secure retirement by expanding coverage and increasing retirement savings, simplifying the current retirement system, and protecting Americans and their retirement accounts. Too many workers reach retirement age without having the savings they need”.
Now this isn’t the first time a bill like this has been introduced. This version of the bill builds on the first Secure Act, which was passed back in 2019.In 2021, the House Ways and Means Committee approved the bill in a unanimous, bipartisan voice vote. Lisa Featherngill, national director of wealth planning at Comerica Bank, had the following remarks to say regarding her opinion of these new policy changes. “It has some provisions that are pretty favorable in terms of allowing individuals to save more for retirement. And it has some provisions that are helpful for younger savers.”
As for some other perks that come with this bill, the second Secure Act has a number of provisions that would help benefit both retirement savers and employers. One would require employers to automatically enroll eligible workers in 401(k) plans at a rate of 3% of salary, which would increase annually until the employee is contributing 10% of their pay. Employees could have the flexibility of either opting out or selecting a different contribution amount. Businesses with 10 or fewer employees or are less than 3 years old would be excluded from the mandate. The plan would also make changes to how much savers can contribute if they’re near retirement, and when retirees need to pull money from their accounts. Individuals aged 62, 63 and 64 could make catch-up contributions of $10,000, up from $6,500. And it would also increase the starting age for required minimum distributions to 73 in 2022, 74 in 2029 and 75 by 2032, up from the current 72.
Student loan borrowers would also get a retirement boost via the legislation, which would basically allow employers to match student loan payments as contributions to retirement. Featherngill elaborates on this by saying “Let’s say you have somebody with significant student loans and really can’t contribute much to their 401(k).This would allow them the opportunity to still get an employer match on the amount paid on their student loans”. Another potential change that could help young workers is that they would be able to elect that all or some of an employer match be applied to a Roth 401(k), which would provide a tax benefit when they get to retirement.
Beyond these features, the legislation would make other changes for survivors of domestic abuse, small business owners and low-wage workers eligible for certain tax credits. It would also create a national database for Americans to reclaim lost retirement accounts. Now that it’s passed the House, the legislation will be sent to the Senate for possible action in April. There are other bills in Congress that overlap with the Secure Act, and if passed first would make similar improvements to retirement saving. In fact, in February, the House Education and Labor Committee amended the RISE Act, which also addresses retirement savings plans. There are also two similar bills in the Senate that aim to address retirement savings. One being the Retirement Security and Savings Act, and the other is called the Improving Access to Retirement Savings Act.