Now that the House sent the Senate its bipartisan “Securing a Strong Retirement Act of 2022” (also known as SECURE 2.0, building on the 2019 SECURE Act), the upper chamber has plenty of work to do to reconcile the bill with its own retirement reform legislation package.
While the House bill and the primary Senate bill—the Retirement Security and Savings Act reintroduced last May by Sens. Rob Portman (R-OH) and Ben Cardin (D-MD)—share many common provisions, there are also a number of differences.
What’s similar
About one-third of the 80 total provisions in the two bills overlap, but the bills are far from identical. Before we explore a few key differences, let’s take a look at some of the main things the two bills have in common:
• Both bills seek to further raise the age for Required Minimum Distributions (the 2019 SECURE Act raised RMD age from 70.5 to 72), but take different approaches to the issue. The House bill would raise the age to 73 in 2023, age 74 in 2030 and age 75 in 2033. The Senate bill would simply raise the RMD age to 75 by 2032. In addition, it would waive RMDs for those with less than $100,000 in retirement savings and reduce the penalty for failing to take RMDs from 50% down to 25%.
• Both bills aim to expand catch-up contribution amounts, although the specifics differ. The House bill would expand the 401k catch-up from $6,500 to $10,000 for those age 62, 63 or 64 beginning in 2024. Workers enrolled in SIMPLE plans would be allowed $5,000 in catch-up contributions, up from the current $3,000. The Senate bill would apply the increased catch-up contribution amount $10,000 to anyone age 60 or older. Also, the House version provides that, starting in 2023, all catch-up contributions must be made to Roth accounts, which would allow the government to tax these dollars sooner. Catch-up contributions currently can be made on either a pretax or Roth basis.
• Both bills would create a retirement savings “lost and found” in the form of a national online database for employees to keep track of their retirement savings accounts when they move between jobs.
• Part time employees who work at least 500 hours for two straight years would be eligible for 401k plans offered by their companies.
• Both bills would make it easier for employers to make matching contributions to an employees’ 401k account on behalf of employees who are making student loan payments instead of contributing to their 401k.
• Both bills would remove the 25% cap value of retirement accounts for those who want to take a qualified longevity annuity contract (QLAC). Under current law, the maximum that can go into a QLAC is either $135,000 or 25%—whichever is less.
There are a number of other provisions that are substantially similar. For a more detailed look, check out this chart from Groom Law Group.
What’s different
• Perhaps the most notable difference between the House bill and the Portman-Cardin bill is that the latter in its current form does not have an auto-enrollment provision, although it includes incentives to encourage companies to implement that feature. The bill that cleared the House would require employers with 11 or more employees to automatically enroll employees in their 401k at a rate of at least 3% and increase it each year until the worker is contributing 10% of their pay (unless the employee opts out). New companies in business for less than three years would be excluded from the mandate.
• The pay-fors: While the House bill includes proposals intended to cover any tax revenue losses resulting from passage of the legislation, the Portman-Cardin bill—which has not yet passed out the Senate Finance Committee—to date does not identify any offsets.
• One thing to watch for that may be added back in as House and Senate leaders look to reconcile the bills? Allowing 403b plans to invest in collective investment trusts (CITs). This provision was stripped from the House bill at the last minute after an objection was raised by House Financial Services Committee Chair Maxine Waters (D-CA), who said her committee had jurisdiction over such a provision because it involves securities law.
What’s next?
The Senate Health, Education, Labor, and Pensions (HELP) committee is actively working on its own bipartisan retirement reform legislation, which Chairwoman Patty Murray (D-WA) said she and Sen. Richard Burr (R-NC) are aiming to unveil this spring.
During a March 29 HELP committee hearing on retirement security, Murray said the bipartisan bill in the works would build on the House’s Retirement Improvement and Savings Enhancement (RISE) Act with additional proposals focused on improving people’s financial security like providing new emergency savings options, auto re-enrollment, helping people find “lost” retirement accounts, improved transparency around lump-sum offers and fee disclosures, and more.
Of note, the Securing a Strong Retirement Act of 2022 also includes the RISE Act, which was passed out of the House Committee on Education and Labor via a voice vote last November.
“Ranking Member Burr and I are working now to pull together bipartisan ideas in this space, and move a retirement legislative package later this spring,” Sen. Murray said.
There’s a chance “The Starter-K Act of 2022,” recently introduced in the Senate by Tom Carper (D-DE) and John Barrasso (R-WY) could work its way into the SECURE 2.0 package as well.
That bill creates “starter retirement plans” intended to streamline regulations and lower costs for small businesses and start-ups, resulting in more access to 401k plans.
Both Senate committees (Finance and HELP) are expected to mark up their respective bills in the coming weeks while also working to reconcile differences between the House and Senate versions. While it could happen this summer, many watching Capitol Hill believe it is more likely that a final SECURE 2.0 package will be attached to a piece of must-pass government spending legislation near the end of the year, much like what happened with the SECURE Act in late 2019.
SEE ALSO:
• Senate Holds Hearing on Retirement and Emergency Savings
• House Committee Introduces New ‘RISE’ Retirement Plan Bill