Bipartisan Retirement Bill Would Extend 401(k) Withdrawals, Boost Auto-Enrollment in Savings Plans

A long-running bill intended to bolster Americans’ retirement savings is finally making its way through Congress.

The House passed the Securing a Strong Retirement Act by a majority of 414 to 5 on Tuesday. The legislation now goes to the Senate.

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“You often hear the phrase ‘transformative’ in this room,” Richard Neal, D-Mass, chairman of the House Ways and Means Committee, said Tuesday as the bill neared approval. “Sometimes it’s hyperbolic, but on this occasion it’s transformative legislation.”

Though the tax-writing Ways and Means Committee passed the bill unanimously nearly a year ago, it has since languished as lawmakers debated another pension proposal Democrats hoped to include in the now-defunct Build Back Better plan.

The US Capitol in Washington on July 27, 2017. (Reuters/Aaron P. Bernstein/Reuters Photos)

The legislation, building on a landmark 2019 retirement law, aims to further expand Americans’ ability to save for retirement and increase their ability to do so.

It includes a number of pension reforms, including expanding auto-enrollment for savings plans, providing assistance to those in debt for student loans, helping businesses provide more options for retirement savings, and raising the age for minimum benefits required to close deferred retirement accounts. like 401(k)s.

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A provision in the second Secure Act would require employers to automatically enroll eligible employees in 401(k) plans starting at 3% of their salary. That would gradually increase until the employee contributes 10% of the gross salary. Employees would have the option to opt out or choose a different contribution amount, while companies with fewer than 10 employees or those under three years of age would be exempt from the law.

The bill would also increase how much individuals can contribute to their savings accounts as they get closer to retirement: For example, individuals ages 62, 63, and 64 could make a catch-up contribution of $10,000, rather than the current $6,500.

Another key measure included in the bill is to increase the starting age for the minimum benefit requirement — the amount a retirement plan account owner must withdraw annually from the time he turns 72 — to 73 in 2022, 74 in 2029. and 75 in 2032.

House Ways and Means Committee Chairman Richard Neal, D-Mass.

Richard Neal, chairman of the House Ways and Means Committee, will chair a format hearing on September 9, 2021. (AP/AP Newsroom)

Student loan borrowers would also benefit from the legislation, which would allow employers to contribute to employees’ retirement accounts when those employees pay student loans. For example, if you spend $100 on your student loan debt, your company can “match” that and donate $100 to your 401(k).

Another notable change that the legislation would make is to allow employer contributions to be deposited into a Roth IRA instead of a 401(k).

It’s unclear how the Senate plans to deal with the second Secure Act, as some senators are working on their own pension legislation.

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During a Senate Committee on Health, Education, Labor and Pensions hearing on retirement savings on Tuesday morning, panel chair Patty Murray, D-Wash., said she is working with Senator Richard Burr, RN.C., to finalize a retirement package “later this spring.” , said Roll Call.

“I hope our discussion today will inform and enhance these efforts and that our Democratic and Republican colleagues will continue to put forward ideas in the coming weeks so that we can build a good two-tier package that helps workers, retirees and families,” Murray said. in the opening. comments.

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