SECURE Act 2.0 was introduced in 2020 by Ways and Means Committee Chairman Richard Neal (D-MA) and ranking member Kevin Brady (R-TX). It’s intention is to incentivize people to save more, improve retirement plans and lower costs for employers. Here, Keith Jones, Senior Counsel responsible for government relations at National Life Group, gives a summary of what this may mean to you and your employees.
- SECURE Act 1.0
The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act was passed by Congress in December 2019 and became law as of January 1, 2020. The SECURE Act changed a variety of retirement account rules, including who is eligible to contribute to retirement accounts and when withdrawals are required. The new legislation also added a new exception to the early withdrawal penalty.
Important retirement account changes from the SECURE Act include:
- The required minimum distribution age increased to 72, up from 70 1/2
- The age limit for IRA contributions was removed
- Inherited retirement account distributions must be taken within 10 years
- New parents can take penalty-free withdrawals
- Long-term part-time employees may now be eligible for 401(k) plans
The SECURE Act was passed with strong bi-partisan support in Congress and has been well received politically.
- Retirement Bills Currently in Congress (SECURE Act 2.0)
Legislators involved in the passage of the SECURE Act are now pressing for additional enhancements to retirement account rules to further enhance participation and savings rates. Several retirement bills have been introduced, including two House bills, the Securing a Strong Retirement Act of 2021 and the Improving Access to Retirement Savings Act, as well as the Retirement Security & Savings Act in the Senate. Various provisions from these bills are currently being considered in both House and Senate committees, including:
- Requiring auto-enrollment for new plans
- Increasing and expanding start-up tax credits for employers
- Increasing RMD age (from 72 to 73-75 over time)
- Increasing catch-up limits (from $6,000 to $10,000 for participants between ages 62-65)
- Allowing “matching” plan contributions for participant student loan payments
- Expansion of access to retirement plans, including part-time worker eligibility
Also in the mix in the House is the Lifetime Income for Employees Act, which would allow annuities as default investment options in retirement plans.
- Outlook for SECURE Act 2.0
The most likely scenario is that the most popular provisions from the bills currently under consideration will be added as amendments to other legislation moving through Congress later in 2021. At this point, it is unclear what legislation may end up being the vehicle for a package of ‘SECURE Act 2.0’ provisions. However, there is strong bi-partisan political support for many of these provisions and legislators are eager to build on the success of the SECURE Act. So, it is likely that at least some of the provisions under consideration will become law.
TC122177(0721)3
