Congress Looking to Make Changes to U.S. Retirement System


Less than two years ago, the ‘Setting Every Community Up for Retirement Enhancement Act’ (Secure Act) significantly changed the nation’s retirement system. 

The Secure Act was signed into law in 2019 by President Donald J. Trump. The bill included provisions aimed at making it easier for companies, including small businesses, to offer 401(k)s and to ensure a steady lifetime income for participants.

Congress is now proposing additional modifications to retirement with two separate bills from each body of Congress.

A House bill and a Senate bill are beginning to make the rounds in Washington D.C., and both bills have bipartisan support.

The ‘Securing a Strong Retirement Act’, also nicknamed “Secure 2.0”, is the House bill which received unanimous approval last month from the Ways and Means Committee

Rep. Richard Neal, D-MA, and ranking member Rep. Kevin Brady, R-TX. are the sponsors of the House bill which seeks to assist in increasing retirement savings, while simplifying and clarifying retirement plan rules.

The Retirement Security and Savings Act (S.1431) is the alternative Senate bill which also includes changes to the current retirement system in the U.S. 

Smiling Asian Mature woman and senior caucasian man Politicians looking at the camera in front of a state capitol

S.1431 is sponsored by Sens. Ben Cardin, D-MD, and Rob Portman, R-OH but has not yet received committee attention.

The Retirement Security and Savings Act modifies various tax policies, credits, and requirements that apply to employer-provided retirement plans and Individual Retirement Accounts.

The Retirement Security and Savings Act modifies various tax policies, credits, and requirements that apply to employer-provided retirement plans and Individual Retirement Accounts.

The two separate bills have similar themes and look to solve some glaring issues for people currently saving for retirement; however, each bill has different ways of going about fixing these issues.

Due to student debt payments, workers entering the workplace often cannot take advantage of 401(k) contributions, or the companies they work for who often will match an employee’s contributions to the plan. 

Both bills enable employers to make contributions to retirement plans such as 401ks (and other similar workplace plans) on behalf of employees who are making student loan payments (in lieu of contributing to the retirement plan).

Both bills also seek to assist workers in catchup contributions. Catchup contributions allow retirement savers who are 50 or older to make catch-up contributions to their retirement savings. On top of the standard annual contribution limits — $19,500 for 401(k) plans and $6,000 for individual retirement accounts in 2021 — those who qualify can put an extra $6,500 in their 401(k) or $1,000 in their IRA.

The House bill would adjust annual catchup amounts based on inflation, and would expand the 401(k) catchup to $10,000 for individuals who are age 62, 63 or 64. Workers enrolled in so-called ‘SIMPLE plans’ would be allowed $5,000 in catchup contributions, up from the current $3,000.

The Senate bill also would index the IRA amount to inflation, but is more generous with the 401(k) catchup contribution of $10,000: It would apply to people age 60 or older.

The House bill also would change the tax aspect of catchup amounts as a way to offset any revenue losses from other provisions.

Both bills also seek to increase the age that mandated annual withdrawals begins.

Finally, both bills also seek to make changes to qualified longevity annuity contracts (QLAC). 

Generally, when you purchase an annuity you have the option to specify when you want to start receiving guaranteed monthly income

Currently, the maximum that can go into a QLAC is either $135,000, or 25% of the value of your retirement accounts, whichever is less.

Both bills would remove the 25% cap. The Senate measure would also increase the maximum amount allowed in a QLAC to $200,000.


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