House Passes the SECURE Act

In a 417-3 vote, the U.S. House of Representatives passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which would significantly overhaul current legislation governing retirement plans. The bill, which is sponsored by Rep. Richard Neal (D-MA), was approved with broad bipartisan support. It must be passed by the Senate and signed by the President before it becomes law.

The legislation went through a few changes shortly before passage. The final bill removed certain provisions that had been included in previous versions which were intended to expand 529 plans to cover the cost of home schooling and attendance at private elementary, secondary, and religious schools. Additionally, the final version included language unrelated to retirement savings, which is intended to fix the 2017 Tax Cuts and Jobs Act provisions that affected military survivor benefits.

The SECURE Act includes the following provisions.

  • Enhance the ability of employers to participate in multiple employer plans (MEPs)
  • Increase the 401(k) automatic enrollment safe harbor deferral cap from 10 percent to 15 percent
  • Simplify 401(k) safe harbor rules
  • Increase the maximum tax credit for small employer plan start-up costs
  • Create a small employer tax credit for including automatic enrollment in new 401(k) and SIMPLE IRA plans
  • Treat taxable nontuition fellowship and stipend payments as compensation for IRA contribution purposes
  • Repeal the maximum age for making Traditional IRA contributions
  • Prohibit credit card loans from employer plans
  • Enhance the preservation and portability of lifetime income features
  • Allow 403(b) plan participants to retain individual custodial 403(b) accounts upon a 403(b) plan termination
  • Clarify certain retirement plan rules relating to church controlled organizations
  • Allow long-term part-time workers to participate in 401(k) plans
  • Allow penalty-free retirement arrangement withdrawals in the event of the birth or adoption of a child
  • Increase the age to begin required minimum distributions from 70½ to age 72
  • Provide pension funding relief to certain community newspapers that sponsor defined benefit pension plans
  • Treat tax-free “difficulty of care” payments received by home healthcare workers as compensation for retirement plan contribution purposes
  • Extend the deadline to adopt a retirement plan to the employer’s tax return due date (including extensions) for that year
  • Allow combined IRS Form 5500 reports for certain similar plans
  • Require benefit statements to defined contribution plan participants to include an annual lifetime income disclosure based on participant balance.
  • Provide a fiduciary safe harbor to employers for selection of a lifetime income provider
  • Protect older, longer service employees in closed defined benefit plans
  • Lower Pension Benefit Guaranty Corporation (PBGC) premiums for pension plans of cooperatives and charities
  • Reinstate, for one year, certain tax benefits for volunteer firefighters and emergency medical responders
  • Expand 529 plan distribution options to cover the costs of apprenticeships and allow for repayment up to $10,000 of student loan repayments for a student or his or her siblings
  • Require most nonspouse beneficiaries of defined contribution plans and IRAs to withdraw inherited balances within 10 years of the account owner’s death
  • Increase penalties for failure to file certain information returns and IRS Form 5500
  • Allow the IRS to share certain returns and return information with other governmental agencies for tax administration purposes
  • Modify rules relating to the taxation of unearned income of certain children

A nearly identical bill, the Retirement Enhancement and Savings Act (RESA) has been introduced in the U.S. Senate by Sen. Charles Grassley (R-IA) and Sen. Ron Wyden (D-OR). The Senate held hearings on the issue as recently as last week but has not yet scheduled a date to vote on its version of the legislation.

With apparent bipartisan support in both the House and Senate, there seems to be growing momentum that could result in 2019 being the year that significant retirement legislation is passed. Ascensus will continue to monitor the progress of RESA and its counterpart legislation in the House, the SECURE Act.