Among the many year-end bills that are circulating in the U.S. Senate and House of Representatives are a number that include fixes for Individual Retirement Accounts (IRAs) and 401k-type retirement savings plans.
Some of the fixes are found in several bills; others are in just one of the bills.
The bills are an alphabet soup of acronyms including RESA, the Retirement Enhancement and Savings Act of 2018; FSA, the Family Savings Act of 2018; EASA, the Encouraging Americans to Save Act and WPPA, the Women’s Pension Protection Act.
Some of the fixes in the bills have been kicking around for a while; others are new.
Several proposals that may be of particular interest to plan participants and IRA account owners are provisions that would:
- Require 401k-type plans to provide an estimate of how much lifetime monthly income an account balance would produce if it were paid as an annuity beginning at retirement age.
- Eliminate the age restriction on contributions to IRA accounts. Currently, individuals aged 70 ½ or older cannot make contributions to their IRAs.
- Increase the contribution limits for the Saver’s Credit and make the credit refundable. It would also be possible to claim the credit by filing an E-Z tax return instead of the long 1040 Form.
- Eliminate the required minimum distribution at age 70 ½ for accounts of $50,000 or less. All accounts of an individual must be included to determine whether they meet the $50,000 threshold.
- Permit the transfer of lifetime income options in a 401k or other individual account plan to another plan or to an IRA if the option is no longer available in the original plan.
- Improve retirement plan coverage for long-term, part-time workers by permitting workers who complete 500 hours of service or more in a year to join a 401k plan after two consecutive years of employment and to make contributions to the plan.
Several of the bills include measures to enable unrelated small employers to join together to form a 401k plan. These provisions for “open multiple employer plans” would shift responsibility for running the plan away from employers to a financial institution or other entity.
Congress may leave town without passing a retirement bill or passing a bill that includes only a few of these provisions.
However, since most of these provisions are in more than one bill, the chances are good that they will reappear in the next Congress. Stay tuned!
Jane Smith is a policy analyst with Washington, D.C.-based Pension Rights Center, a nonprofit consumer organization committed to protecting and promoting the retirement security of American workers, retirees, and their families.
Jane Smith is a policy analyst with Washington, D.C.-based Pension Rights Center, a nonprofit consumer organization committed to protecting and promoting the retirement security of American workers, retirees, and their families.
