A bipartisan bill to increase retirement plan coverage and make it easier to transfer savings between jobs will get a floor vote in May.
House Majority Leader Steny Hoyer sent a “Dear Colleague” letter Thursday to fellow Democrats. It set the legislative schedule about which bills will appear, and when, in the upcoming work session.
Notably, the SECURE Act was among them.
Key provisions currently contained in the SECURE Act include:
- Increasing the Auto Enrollment Safe Harbor Cap: The legislation increases the cap from 10% to 15% of employee pay that required automatic escalation of employee deferrals go no higher than under an automatic enrollment safe harbor plan.
- Simplification of Safe Harbor 401k Rules: The legislation changes the non-elective contribution 401k safe harbor to provide greater flexibility, improve employee protection and facilitate plan adoption. The legislation eliminates the safe harbor notice requirement, but maintains the requirement to allow employees to make or change an election at least once per year.
- Increase Credit Limitation for Small Employer Pension Plan Start-Up Costs: To make it more affordable for small businesses to set up retirement plans. The legislation increases the credit by changing the calculation of the flat dollar amount limit on the credit to the greater of (1) $500 or (2) the lesser of (a) $250 multiplied by the number of non-highly compensated employees of the eligible employer who are eligible to participate in the plan or (b) $5,000. The credit applies for up to three years.
- Small Employer Automatic Enrollment Credit: The legislation creates a new tax credit of up to $500 per year to employers to defray startup costs for new section 401k plans and SIMPLE IRA plans that include automatic enrollment. The credit is in addition to the plan start-up credit allowed under present law and would be available for three years. The credit would also be available to employers that convert an existing plan to an automatic enrollment design.
- Repeal of Maximum Age for Traditional IRA Contributions: The legislation repeals the prohibition on contributions to a traditional IRA by an individual who has attained age 701⁄2.
- Portability of Lifetime Income Options: Permits qualified defined contribution plans, section 403b plans, or governmental section 457b plans to make a direct trustee-to-trustee transfer to another employer-sponsored retirement plan or IRA of lifetime income investments or distributions of a lifetime income investment in the form of a qualified plan distribution annuity, if a lifetime income investment is no longer authorized to be held as an investment option under the plan. The change will permit participants to preserve their lifetime income investments and avoid surrender charges and fees.
- Allowing Long-term Part-time Workers to Participate in 401k Plans: Under current law, employers generally may exclude part-time employees (employees who work less than 1,000 hours per year) when providing a defined contribution plan to their employees. Except in the case of collectively bargained plans, the bill will require employers maintaining a 401k plan to have a dual eligibility requirement under which an employee must complete either a one year of service requirement (with the 1,000-hour rule) or three consecutive years of service where the employee completes at least 500 hours of service.
- Increase in Age for Required Beginning Date for Mandatory Distributions: The bill increases the required minimum distribution age from 701⁄2 to 72.