Have you heard there is new retirement legislation? Meet SECURE 2.0.
There is more legislation in the House and Senate aimed at improving retirement savings. Here we break down the key takeaways.
The Bill Details
- The new legislation is being called SECURE 2.0. SECURE Act – Setting Every Community Up for Retirement Enhancement Act was passed in 2019. This new legislation builds on SECURE Act of 2019.
- If you want to research the bills their technical names are House Version - H.R. 2945 and Senate Version- S.1770.
- The House version passed on March 29, 2022, with overwhelming (414-5) bipartisan support.
- The Senate version was introduced on May 20, 2021, and remains in committee.
HOUSE AND SENATE AGREEMENTS
ABOUT 1/3 OF THE 80 TOTAL PROVISIONS FROM THE TWO BILLS OVERLAP BOTH INCLUDE: |
Searchable national "lost and found" registry for missing retirement funds. |
Allows employers to offer matching retirement contributions for employees paying off student loans. |
Part-time employees who work at least 500 hours for two straight years would be eligible for 401(k) plans offered by the company. |
| Required Minimum Distribution (RMD) penalty is reduced from 50% to 25% |
DIFFERENCES
HOUSE | SENATE |
REQUIRED MINIMUM DISTRIBUTION (RMD) CHANGES | REQUIRED MINIMUM DISTRIBUTION (RMD) CHANGES |
RMD Age Changes by Year 2022 - age 73 2029 - age 74 2032 - age 75 | Current age requirement would remain in place until 2032. 2032 the RMD age increases to 75. Waives RMD's for anyone with less than $100,00 in retirement savings. |
CATCH-UP CONTRIBUTIONS | CATCH-CONTRIBUTIONS |
| Requires all catch-up contributions to be made in a Roth, allowing the government to tax the dollars sooner. | Maintains the current catch-up rule where it can be made pre-tax or in a Roth. |
| 401(k) Starts in 2024 - Ages 62, 63, or 64 catch up increases from $6,500 to $10,000 | 401(K) Starts at age 60 and does not phase out at 65. Catch-up increase from $6,500 to $10,000 |
| SIMPLE IRA Catch-up increases from $3,000 to $5,000 | SIMPLE IRA Catch-up increases from $3,000 to $5,000 |
Automatic enrollment and automatic escalation in new 401(k) and 403(b) for businesses with more than 11 employees and in business for more than 3 years. | Does not include an auto-enrollment provision although it includes incentives to encourage companies to implement that feature. |
Many believe that SECURE 2.0 will be passed in 2022 due to its bipartisan support. We will keep you updated, and if you have questions please let us know!
https://www.investopedia.com/secure-2-0-definition-5225115
