Look for auto-enrollment and student loan provisions in the retirement invoice


Benefits Advisors encouraged by a major retirement savings overhaul in 2019 are asking Congress for a complementary legislative package that could include automatic enrollment and student loan repayment provisions.

The house presented Securing a solid retirement Act of 2020 at the end of the last legislative session, but, with strong bipartisan support and links to a Senate-supported proposal, it should form part of a new package dubbed “SECURE Act 2.0” on Capitol Hill.

This new legislative proposal, probably a consolidation of the two proposals expected later this year, follows the Setting Every Community Up for Retirement Enhancement (SECURE) law that former President Donald Trump promulgated at the end of 2019. The law s ‘is slightly enlarged. – Employer access to plans that do not require compliance testing, raised the age at which required minimum distributions went into effect, and connected some part-time workers to retirement benefits for the first time.

SECURE Act 2.0 picks up where part one left off, said Fred reish, partner of Faegre Drinker Biddle & Reath in Los Angeles. The main purpose of the proposal is to extend coverage by imposing automatic registration in 401 (k), 403 (b) and SIMPLE individual retirement account plans; further lowering the standard for long-term part-time employees eligible for coverage; and even give employers more tools to encourage savings.

“It aims to strengthen the SECURE law and improve the provisions that already existed,” said Denise appleby, Founder and CEO of Appleby Retirement Consulting near Atlanta. “Yes, the SECURE law was good, but we need to take it a step further. “

Here are some key provisions that Appleby and Reish said they expect from a SECURE Act 2.0 package:

Automatic registration: Running out of mandatory retirement benefits or universal coverage, the automatic enrollment of new employees in existing pension plans is generally considered to be the most critical element in encouraging people to save for their retirement. Analysts at the Georgetown University Center for Retirement Initiatives have estimated that by 2040, automatic enrollment programs like those proposed in the last session could extend coverage to nearly 40 million workers who do not have tax-advantaged savings. The main proposals would start new hires at a base contribution rate of 3%, increasing by 1% per year and capped at 10% of salary.

Minimum required distributions: Minimum Required Distributions, or RMD, are withdrawals that the Internal Revenue Service says workers or retirees must make after a certain age. SECURITY law raised this age threshold to 72. The successive package is expected to go further – raising the RMD age to 75 and exempting retirement accounts of $ 100,000 or less. Excise tax penalties for non-payment of RMD would also be reduced. Likewise, most of the proposals would increase the catch-up contribution limits for those nearing retirement. Older savers who adopt an aggressive retirement investment strategy could contribute an additional $ 10,000 annually to the 401 (k) and 403 (b) plans – compared to $ 6,500 – and $ 5,000 to IRA-backed IRAs. employer – for $ 3,000.

Simplification of the saver’s credit: The savings credit offsets the initial cost of deferred employee contributions with a non-refundable tax credit of up to $ 1,000. The IRS calculates a filer’s credit using an adjusted gross income and a tax filing status scale of 10% to 50% of annual contributions. The SECURE Act 2.0 would eliminate the graduated lending rate and replace it with a fixed rate of 50% for eligible savers while increasing the maximum dollar amount to $ 1,500. Appleby, who is also the founder and CEO of the consumer advocacy site Retirement Dictionary, said that a simplified savings loan could greatly encourage people to save.

Help with student loans: Benefits Advisors have called on Congress to allow companies to deduct pension contributions they make for employees focused on pay tuition fees for a while. The second version of the SECURE law should allow employees with student loans to make payments in place of contributions while benefiting from their employer’s consideration. The IRS suspended a regulatory project in 2019 that would have allowed such payments.

Lost and Found Database: The US Department of Labor has been intensify enforcement of the law on missing participants, cause headaches for advisors who want a hard set of rules for tracking or finding plan members or beneficiaries who haven’t claimed the money they’ve saved. Last year, the House Retirement Program proposed the creation of a national online program for online retirement accounts to be managed by the Pension Benefit Guaranty Corporation. The wording of the bill suggests that it would create a clearinghouse for participants to find lost benefits and plans that cannot find former employees due to a change of name or address.


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