Understanding SECURE 2.0 and the Retirement Security & Savings Act

Retirement Security & Savings Act (Portman-Cardin)

Securing A Strong Retirement Act (Neal-Brady)

Automatic enrollment

• • Creates a new safe harbor with automatic deferral levels starting at 6% of pay in addition to the existing safe harbor at 3%. Offers a tax credit for employers that offer both safe harbors.
• • Establishes a new three-year, $500 per-year tax credit for small businesses that automatically re-enroll plan participants into the employer plan at least once every three years.

• Requires an initial automatic enrollment rate of at least 3% for newly created 401(k) and 403(b) plans. Existing plans would be exempt.

Catch-up contributions

• • Increases the 401(k) “catch-up” contribution limit to $10,000 and the SIMPLE contribution limit to $5,000 for participants aged 60 and up.
• • Indexes to inflation the allowable catch-up contribution to Individual Retirement Accounts (IRAs).

• • Increases the 401(k) “catch-up” contribution limit to $10,000 and the SIMPLE contribution limit to $5,000 for participants aged 62, 63, and 64.
• • Indexes to inflation the allowable catch-up contribution to Individual Retirement Accounts (IRAs).

403(b)s

• • Allows 403(b) plans to invest in collective investment trusts (CITs).
• • Conforms 403(b) hardship rules to 401(k) hardship rules.

• • Allows 403(b) plans to invest in CITs.
• • Conforms 403(b) hardship rules to 401(k) hardship rules.
• • Applies the pooled employer plan (PEP) rules from the SECURE Act to 403(b) plans.

Student loan matching

• Allows employers to make a matching contribution to the employee’s retirement account based on his or her student loan payment.

Saver’s Credit

• • Expands the existing Saver’s Credit income thresholds.
• • Makes the Saver’s Credit directly refundable into retirement accounts for low-income savers.

• • Directs the Internal Revenue Service (IRS) to increase public awareness of the Saver’s credit.

Required minimum distributions (RMDs)

• • Raises the age for RMDs from age 72 to age 75 by 2032.
• • Creates an exception from RMDs for individuals with $100,000 or less in aggregate retirement savings.

• • Raises the age for RMDs from age 72 to age 75 by 2032.

Lifetime income

• • Eliminates the barriers to including annuities in plans and IRAs from RMD regulations.
• • Removes the 25% maximum contribution cap on qualified longevity annuity contracts (QLACs) in retirement accounts.
• • Directs the Treasury Department to create regulations allowing ETFs to be widely available through individual variable annuities.
• • Raises the maximum QLAC contribution cap from $135,000 to $200,000.
• • Directs Treasury to allow variable and indexed annuities to be used as QLACs, provided that the contract guarantees a minimum level of annuity payments.
• • Eliminates incentives not to partially annuitize.

• • Eliminates the barriers to including annuities in plans and IRAs from RMD regulations.
• • Removes the 25% maximum contribution cap on qualified longevity annuity contracts QLACs in retirement accounts.
• • Directs the Treasury Department to create regulations allowing ETFs to be widely available through individual variable annuities.

Encouraging small businesses to offer plans

• • Increases the current law tax credit for the smallest businesses starting a new retirement plan to 100% of costs, up from 50%.
• • Simplifies rules for small businesses, including allowing all businesses to self-correct all inadvertent plan violations under the IRS’ Employee Plans Compliance Resolution System.
• • Simplifies “top-heavy” rules for small business plans to reduce the cost of enrolling new employees.

Other provisions to expand access to retirement plans

• • Expands the eligibility of 401(k)s to include part-time workers that complete between 500 and 1,000 hours of service for two consecutive years.
• • Creates a national, online database of lost accounts.
• • Makes it easier for military spouses who change jobs frequently to save for retirement.
• • Directs Treasury, DOL and PBGC to review the current ERISA and Code reporting and disclosure requirements and make recommendations to Congress to consolidate, simplify, standardize and improve such requirements.

Performance benchmarks for target date funds

• • Directs DOL to modify its regulations so that an investment that uses a mix of asset classes can be benchmarked against a blend of broad-based securities market indices.

Electronic delivery of plan documents

• • Requires defined contribution plans to provide a paper benefit statement at least once annually unless the participant elects otherwise.

Expanding Roth

• • Allows SIMPLE IRAs to be offered on a Roth basis.
• • Permits Roth IRA amounts to be rolled to plans.
• • Extends Roth RMD rules to Roth amounts in plans.

• • Allows SIMPLE and SEP contributions to be designated as Roth.
• • Allows employer matching contributions to be made on a Roth basis.
• • Requires all age 50+ catch up contributions to be made on a Roth basis for 401(k), 403(b)s, and SIMPLEs.