If there were any doubts that enhancing retirement saving opportunity is a high congressional priority, one need not look beyond immediate events for evidence. In a week when the Senate Finance Committee held a hearing on retirement security, and the House of Representatives is preparing to begin consideration of comprehensive retirement legislation, two familiar senators are re-introducing their own bill with similar purpose.
Senators Rob Portman (R-OH) and Ben Cardin (D-MD) have renewed a legislative partnership that began more than two decades ago as congressmen in the U.S. House of Representatives, before both were elected to the U.S. Senate. The Retirement Security and Savings Act of 2019 is a re-introduction of legislation the senators introduced in December 2018, during the final days of the 115th Congress. Limited changes have been made to that legislation, whose provisions include the following.
- Create a new automatic-enrollment/automatic-escalation safe harbor for 401(k)-type plans, with higher contribution levels
- Enhance the small employer tax credit for establishing a retirement plan
- Provide a small employer tax credit for implementing automatic enrollment
- Provide an employer tax credit for implementing automatic employee re-enrollment every three years
- Simplify participant notices in automatic-enrollment type plans
- Liberalize the Saver’s credit for contributions to employer plans and IRAs, and make it refundable and payable to a retirement account
- Require that certain long-term, less-than-fulltime employees be allowed to participate in deferral-type retirement plans, but apply nondiscrimination benefits testing and top-heavy testing separately to such employees
- Allow nonspouse retirement account beneficiaries to do indirect (60-day) rollovers to beneficiary IRAs
- Exempt small aggregate retirement balances ($100,000 or less) in IRAs or defined contribution plans from required minimum distributions (RMDs); the 2019 version does not apply to beneficiaries
- Increase the RMD age in stages to age 75
- Reduce the excise tax for RMD failures from 50% to 25%
- Reduce—under certain circumstances—the excise tax for IRA excess contributions from 6% to 3%