Recently, the United States House of Representatives passed the SECURE Act 2.0 (Securing a Strong Retirement Act of 2021) on March 29, 2022, by an overwhelming bipartisan vote, 414-5. This is after the House Ways and Means Committee unanimously approved the bill in May 2021. The bill heads to the Senate for consideration.
Here are possible actions the Senate can take:
- Mark it up
- Send it to committee for a vote
- Advance a companion bill
Before the bill becomes a law, all the differences would need to be reconciled, which includes returning to the House of Representatives to consider changes and then vote in before heading to the President for his signature.
Will the secure 2.0 act benefit me?
While there are likely to be changes to this bill, it has the capacity to spur substantial changes in the retirement industry. Additionally, it presents vital planning opportunities for financial experts and their clients.
What should I know about the secure 2.0 act?
Below are the key provisions of the bill in the current form you need to know
- Small Business Owners Incentives: This bill proposes an increase in the small employer start-up credit to cover all the costs to small employers for the first three years. The bill also proposes the creation of an additional new credit to encourage small employers to make direct contributions for their employees, offsetting not more than $1,000 of the employer’s contributions per every participating employee.
- Retirement Plan: The bill seeks to introduce several changes for those working with plan sponsors with existing retirement plans. First, the bill would require employers to automatically sign-up eligible workers in new 403(b) 401(k) and SIMPLE plans at 3% of salary, increasing annually until the contribution reaches 10% of their pay. This mandatory auto-enrollment plan wouldn’t apply to existing retirement plans. Employees may choose to withdraw, and businesses having not more than ten employees or having been in operation for no more than three years are excluded from the mandatory automatic enrollment.
- Young Workers: One of the provisions of the bill allows employers to link participants’ student retirement account contributions o their loan repayments. The provision could assist in addressing what borrowers normally view as a proposition of paying down debt or saving for retirement.
- Part-Time Employees Provision: Long-term, part-time employees are allowed greater access to retirement plans through the SECURE 2.0 Act. This bill would accelerate this process by reducing the period for measuring eligibility. This would imply that these part-time employees would become as early as 1st January 2023.
- New Required Minimum Distribution Age Proposal: The RMD age presently is 72 years, meaning individuals requires taking their initial RMD by 1st April of the year after their 72nd birthday. The bill additionally increases this age to 75 years.
All in all, as with any bill, changes are bound to happen as SECURE 2.0 act goes through the legislative process. However, at this point, it seems like we might see significant retirement legislation in the future that may have vital implications for retirement plan sponsors and individual investors alike.