Employee benefits consulting firm Strategic Benefits Advisors (SBA) helpfully—and succinctly—lists the provisions of the bipartisan Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which was advanced by the House Ways and Means Committee on April 2.
The committee acted on the same day the Senate reintroduced its latest version of the Retirement Enhancement Savings Act (RESA).
The bills provide “some administrative relief to employers and incentivize them to offer more savings plan opportunities and retirement income security to workers. A reconciled version of the two bills is expected to become law,” SBA notes.
According to SBA Principal Mindy Zatto, the proposed legislation stands to benefit both employers and employees.
Retirement plan provisions
The SECURE bill includes provisions for employer-sponsored retirement plans which would:
- Relieve nondiscrimination testing requirements for closed defined benefit (DB) plans
- Delay the required minimum distribution starting age from 70½ to 72
- Provide more time to retroactively adopt certain retirement plans
- Simplify rules and notice requirements related to qualified nonelective contributions in safe harbor 401k plans
- Increase the cap on auto-escalation of contributions for safe harbor 401k plans from 10% to 15% of pay
- Allow employers of all sizes to join together and create “open” multiple-employer plans (MEPs) to make defined contribution (DC) plans more affordable
- Encourage lifetime income options in DC plans through new participant disclosures, new provider selection rules and new ways to increase the portability of lifetime income investments
- Offer consolidated Form 5500 for certain DC plans to reduce administrative costs
- Allow long-term, part-time workers to participate in employer 401k plans
- Increase penalties for failure to file retirement plan returns (such as Forms 5500), required notifications of changes and required withholding notices
- Prohibit DC plans from extending loans to participants via credit cards
- Reduce payout period for non-spouse beneficiaries of DC plans (and IRAs) to 10 years after the participant’s (owner’s) death
- Convert custodial accounts from terminated 403b plans into IRAs
- Increase or create tax credits for small employers that start new retirement plans or automatically enroll workers into new 401k savings plans
- Reduce premiums for cooperative and small-employer charity (CSEC) plans
- Provide funding relief for community newspaper pension plans and clarify church plan requirements
Individual provisions
Other provisions of the SECURE Act specifically for individuals are designed to:
- Eliminate the current age 70½ limit for contributing to an IRA
- Allow graduate students to count stipends and non-tuition fellowship payments as compensation for IRA contribution purposes
- Permit penalty-free withdrawals of up to $5,000 from qualified retirement savings plans to help pay for childbirth or adoption expenses (with repayment permitted)
- Expand allowable expenses for 529 college savings plans to include apprenticeships, homeschooling, private school costs or up to $10,000 of qualified student loan repayments
- Increase penalties for individuals who fail to file tax returns.
“Employers that offer retirement programs should take the opportunity now to evaluate options for their current and future plans under the SECURE Act,” Zatto concluded. “The proposed bill includes features that can be substantially beneficial for both plan sponsors and participants who want to increase retirement income security.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
