It’s two down, one to go for the SECURE Act’s wild week after the Senate today passed the $1.4 trillion appropriations package on a 71-23 vote which includes the landmark retirement reform package that enjoys strong bipartisan support.
Now with House and Senate approval, the massive spending bill heads to President Donald J. Trump’s desk, where he is expected to sign it on Friday, clearing the way for the SECURE Act to become law in a mere 13 days.
Trump, fresh off Wednesday’s impeachment vote in the House, needs to sign the bills by Friday to keep federal departments running, and his advisors have made it clear he will indeed approve the appropriations package to fund the government through Sept. 30, 2020.
So it is essentially down to a mere formality before the most significant retirement reform legislation since the Pension Protection Act of 2006 becomes law and triggers major changes in the 401k market.
“The SECURE Act is a much-needed and highly anticipated step in creating new pathways to retirement security. We have new opportunities today to protect people, businesses and futures in proven and innovative ways,” said John Carter, president and COO of Nationwide Financial, in a statement released shortly after the Senate vote.
Emphasizing the importance of this legislation, according to Nationwide’s recent business owner survey, 80% of small business owners believe the SECURE Act will allow them to offer a 401k plan that rivals those offered at large corporations. Among those who are familiar with the SECURE Act, 84% believe the legislation should make it easier for small business owners to offer a 401k.
Among the key provisions:
- Provides fiduciary safe harbor to 401k plan sponsors who include annuities among offerings to plan participants.
- Increases the tax credit for employers introducing new retirement plans from $500 to $5,000, and small employers that implement an automatic enrollment feature in the plan design will be eligible for an additional $500 credit.
- The SECURE Act’s Open MEP provision will make it easier and more economical for smaller employers to offer retirement plans by allowing for the creation of pooled retirement plan providers.
- Many part-time workers will be eligible to participate in an employer retirement plan thanks to the SECURE Act.
- Pushes back the age at which retirement plan participants need to take required minimum distributions (RMDs), from 70½ to 72.
- As a “pay-for,” the SECURE Act will eliminate the use of the “Stretch IRA.”
Cruz votes against spending bill
One notable Republican Senator who voted against the spending bill on Thursday was Ted Cruz, who was among a handful of Senators to place “holds” on the SECURE Act after the House passed it by a 417-3 vote in May.
The various “holds” prevented the SECURE Act from being passed via unanimous consent in the Senate, stalling it for months despite strong bipartisan support and leaving its last-minute attachment to this week’s $1.4 trillion spending bill as its last chance at becoming law in 2020.
Cruz placed his “hold” on the bill because he objected to the 11th-hour removal of a provision in the SECURE Act that would have expanded the use of 529 plans by House Speaker Nancy Pelosi, reportedly due to pressure from teachers’ unions who objected to the provision allowing money saved in 529 accounts to be used for home education, apprenticeships, student loan expenses and education support for students with disabilities.
The removal of that provision was clearly still on Cruz’s mind this week, as he posted a six-minute video on Twitter railing against a variety of provisions included and not included in the 2,313-page spending bill.
“Christmas came early to Washington. For the lobbyists—lobbyists who are bankrupting this country,” Cruz says at the beginning of the video. “I present to you the massiveomnibus bill—2313 pages, dropped on us the day before yesterday. No one’s read it. There isn’t a person alive who has read this piece of garbage. But it was put together in the dark of the night with Republican leadership and Chuck Schumer cutting a deal.”
In the video, Cruz holds up a variety of hand-written pages that highlight his objections. One of them refers specifically to the removal of the 529 provision from the SECURE Act.
“It fails to expand college 529 savings plans, and to expand education—this is a bipartisan idea—this is an idea that passed the House Ways and Means Committee unanimously, until the teacher’s union got Nancy Pelosi to do a drive-by shooting and strip it out. Hurting parents that have kids with disabilities, hurting kids with disabilities, hurting home schoolers. Hurting millions of public school students who are prevented from using 529 savings plans to pay for tutoring and standardized tests. It doesn’t do that at all,” Cruz concludes on the matter, as he crumples the sheet of paper.