A group of eight retirement planning industry organizations are urging Congress to finalize and pass technical corrections that would expand provisions in SECURE 2.0 legislation.
Groups including the American Benefits Council, the Investment Company Institute (ICI), the Insured Retirement Institute (IRI), The SPARK Institute, and the United States Chamber of Commerce wrote a letter to Congress last Thursday pressing members to finalize the SECURE 2.0 Technical Corrections Act of 2023, to allow provisions of the bill to be implemented in a timely manner.
The letter addressed Sens. Chuck Schumer (D-NY), Mitch McConnell (R-KY), Bernie Sanders (I-VT), Bill Cassidy (R-LA), along with Reps. Mike Johnson (R-LA), Hakeem Jeffries (D-NY), Virginia Foxx (R-NC), and Bobby Scott (D-VA).
The corrections would fix issues that delay SECURE 2.0 provisions for select groups. One main area of concern in the letter is the absence of a “distribution trigger” in SECURE 2.0’s Section 326, which provides special treatment for distributions to terminally ill plan participants beginning on or after December 21, 2022. Without a trigger, terminally ill participants cannot take out distributions from their retirement account solely because of terminal illness.
“The individual must otherwise be eligible for a plan distribution [e.g., termination of service or age 59½],” the groups stated. “This undermines the purpose of the new provision and could prevent a terminally ill individual from accessing assets critical to their medical and other care during this time.”
The note describes the absence of a distribution trigger as inconsistent with other penalty-free distribution provisions under SECURE 2.0, including those for emergency expenses, domestic abuse victims, and qualified disasters.
Other corrections involve Section 101 of SECURE 2.0, which would expand automatic enrollment in retirement plans. The letter questions whether the latest provision would exempt automatic enrollment requirements for plans who merge into certain pooled employer plans (PEPs) and multiple employer plans (MEPs).
“We understand that Congress intended for the exemption to be based on the date of establishment of the adopting employer’s plan, not the date of establishment of the MEP/PEP,” the groups added. “However, Treasury/IRS guidance might be read as basing the exemption on the MEP/PEP establishment date. This is currently causing unintended disruption and reduced choice in the MEP/PEP market.”
The letter also asks Congress members to include corrections that clarify limits on student loan payments, along with time-sensitive provisions on SIMPLE and SEP contributions that would reduce Roth individual retirement account (IRA) limits, an issue that the groups argue have “no effect on high-income individuals but can adversely affect many middle-income individuals.”
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3 Key Fixes in New SECURE 2.0 Technical Corrections Bill