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Less than two years after the Secure Act ushered in significant changes to the nation’s retirement system, more modifications may be on the horizon.
Two similar, bipartisan bills — one each in the House and Senate — aim to build on that 2019 legislation as a way to bolster the ranks of savers and increase retirement security. While the measures are in the early stages of the legislative process, observers expect there to be some movement on them in the coming months.
“The outlook is positive,” said Timothy Lynch, senior director at the law firm of Morgan Lewis. “There’s bipartisan support, so there’s likely to be action sooner rather than later.”
However, he said, the differences between the bills would need to get worked out. And, exactly how to offset any resulting revenue losses could be a sticking point.
“The House bill has some ‘pay-fors,'” said Paul Richman, chief government and political affairs officer for the Insured Retirement Institute. “The Senate bill has none at all, but that could change.”
Called the Securing a Strong Retirement Act — and nicknamed “Secure 2.0” — the House bill received unanimous approval last month from the Ways and Means Committee. Its sponsors are the panel’s chairman, Richard Neal, D-Mass., and ranking member Kevin Brady, R-Texas.
The Senate bill — called the Retirement Security and Savings Act and sponsored by Sens. Ben Cardin, D-Md., and Rob Portman, R-Ohio — has not yet received committee attention but is expected to next month, according to a person familiar with the bill’s path forward.
Here are some of the main provisions in the two measures, with their differences noted, that would impact retirement savers and retirees.
Most companies that offer 401(k) plans will match your contributions up to a certain amount — e.g., a 100% match for the first 3% you contribute, with a 50% match for the next 2%. For workers whose student loan debt keeps them from putting money into their retirement accounts, it means missing out on that company money.
Both the House and Senate measures would enable employers to make contributions to 401(k) plans (and similar workplace plans) on behalf of employees who are making student loan payments instead of contributing to their retirement plan.
“The larger issue of how to address student loan debt doesn’t have a lot of bipartisan agreement,” Lynch said. “This would be one step to try to help.”
Current law allows retirement savers age 50 or older to make so-called catchup contributions to their retirement savings. On top of the standard annual contribution limits — $19,500 for 401(k) plans and $6,000 for individual retirement accounts in 2021 — those who qualify can put an extra $6,500 in their 401(k) or $1,000 in their IRA.
Both the House and Senate bills aim to expand those amounts, although the specifics differ a bit.
The House bill would adjust annual catchup amounts based on inflation, and would expand the 401(k) catchup to $10,000 for individuals who are age 62, 63 or 64. Workers enrolled in so-called SIMPLE plans would be allowed $5,000 in catchup contributions, up from the current $3,000.
The Senate bill also would index the IRA amount to inflation, but is more generous with the 401(k) catchup contribution of $10,000: It would apply to people age 60 or older.
The House bill also would change the tax aspect of catchup amounts as a way to offset any revenue losses from other provisions.
That is, all catchup contributions to 401(k) plans and the like would be treated as Roth contributions — i.e., after tax — starting next year. Current law allows workers to choose whether to make those contributions on a pre-tax or Roth basis (assuming their…