With growing bipartisan momentum that has lent new optimism for eventual enactment, comprehensive retirement legislation has been passed by the House of Representatives and now moves on to the U.S. Senate. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 passed in the House on May 23 with only token opposition, its 417-3 margin a demonstration of overwhelming support.
Even before the SECURE Act’s passage just prior to the start of the Memorial Day recess, Senate Finance Committee Chairman Chuck Grassley (R-IA) indicated his eagerness to follow the House’s lead and tackle retirement enhancement legislation. Though the timing of congressional action is always difficult to predict, it is widely expected that the Senate will now take up a similar bill—the Retirement Enhancement and Savings Act of 2019, or RESA.
Any differences between the House and Senate retirement bills would have to be resolved in a conference committee process. Barring any irresolvable policy differences or unforeseen procedural obstacles, comprehensive retirement enhancements are thought to have the best chance of enactment in many years.
A Few Last-Minute Changes
Like many bills, the SECURE Act underwent changes between its initial committee mark-up and when the legislation was passed by the House. These changes are described below.
- The final House version removed a provision under which certain home schooling and elementary and secondary private school expenses would be treated as eligible 529 plan expenses. (Provisions treating certain apprenticeship expenses and student loan repayments as eligible 529 plan expenses remain in the SECURE Act.)
- The final version also increased penalties for certain retirement plan reporting failures.
Other Provisions Remain the Same
All other SECURE Act provisions related to retirement and education savings remain the same. To review the details of this proposed legislation, see Ascensus’ previous Washington Pulse on the SECURE Act.
Count on Ascensus for the Latest Updates
Ascensus will closely monitor the progress of retirement legislation in the U.S. Senate and any further action taken by the House that may lead to enactment. Watch Ascensus’ Latest News for future updates.
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.