Congress Proposes Retirement Plan Improvements through SECURE Act
posted Apr 9, 2019 by Henry A. Silva, CPA, CGMA, MBA in the Business Blog
On April 2, 2019, Congress passed a bill aimed at opening the door for more small business employers to offer retirement plans and for more employees to have access to such savings opportunities. The “Setting Every Community Up For Retirement Enhancement Act of 2019,” or SECURE Act, introduces the most comprehensive changes to private retirement plans in more than 10 years.
What does the bill address?
Today, many Americans are in danger of not having enough retirement savings to maintain their standard of living. The SECURE Act intends to increase the flexibility of 401(k) plans and encourage small businesses to provide retirement benefits to their workers.
Congress has not passed major retirement legislation since 2006 with the Pension Protection Act, which addressed underfunded accounts and reforms to that system.
What’s included in the bill?
Here’s a look inside the SECURE Act bill:
- Repeals the maximum age for IRA contributions and raises the age for required mandatory distributions from 70 ½ to 72.
- Expands the use of 529 plans to include home schools and student loans (previously only applied to college related expenses)
- Allows small businesses to join forces to offer 401(k)s (multi-employer plan, or MEP). Participating businesses will only need to submit one form 5500 on behalf of the MEP.
- Creates a new tax credit of up to $500 for companies that set up plans with automatic enrollment.
- Allows businesses with long-term and part time workers to become eligible for retirement benefits.
What will the bill accomplish?
According to Richard Neal, chairman of the Ways and Means Committee and one of the bill’s sponsors, “The provision will make it easier for small businesses to offer retirement plans to their employees, and will result in the formation of an estimated 700,000 new retirement accounts.”
The SECURE Act has gotten “fast track” treatment in Congress, since the Ways and Means Committee has already approved the bill, making the move less than a week after the bill’s formal introduction.
The Ways and Means’ vote clears the path for full House consideration of the legislation. Bipartisan members of the committee are optimistic about the legislation’s future. The committee hopes to have the bill on the President’s desk by the end of 2019.
This legislation is expected to make a huge impact on employers and their workers. Making retirement more accessible is a welcomed change that will help more Americans achieve financial security for their future.
Questions on the SECURE Act? Contact us.