The Senate version of SECURE 2.0, titled the “Enhancing American Retirement Now (EARN) Act,” is scheduled for mark up Wednesday morning.
“This next step demonstrates powerful momentum behind putting a comprehensive retirement security measure on President Biden’s desk this year.”
The news comes two weeks after Senators Patty Murray, D-Wash., and Richard Burr, R-N.C., introduced a SECURE 2.0-like bill titled the “Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE & SHINE) Act.”
“Americans deserve dignified retirements after decades of hard work, and our bill is an important step forward,” Senate Finance Committee Chair Ron Wyden, D-Ore., said in a statement. “These workers frequently have physical, demanding jobs, and often depend solely on their Social Security income. Too often, they simply do not have the resources to last through retirement. Under our reforms, many more workers would access resources for retirement and see meaningful federal retirement contributions year after year.”
Dan Zielinski, Chief Strategic Communications Officer at the Insured Retirement Institute (IRI), added that “Coming on the heels of the Senate HELP Committee approval of the RISE & SHINE Act, this next step demonstrates powerful momentum behind putting a comprehensive retirement security measure on President Biden’s desk this year.”
Important provisions
Important provisions of the (EARN) Act include:
RMDs: An increase in the age for the required beginning date for mandatory distributions. Tax-preferred retirement savings plans and IRAs are generally required to begin distributions once the account owner reaches age 72. This provision would increase the age to 75, effective after 2031.
Matching payments: This provision would modify the credit with respect to IRA and retirement plan contributions by changing it from a credit paid in cash as part of a tax refund to a government matching contribution that must be deposited into a taxpayer’s IRA or retirement plan. The credit would be 50% of IRA or retirement plan contribution up to $2,000 per individual.
Withdrawals for certain emergency expenses: This provision would provide an exception for certain distributions used for emergency expenses, which are unforeseeable or immediate financial needs relating to personal or family emergency expenses. Only one distribution would be permitted per year of up to $1,000, and a taxpayer would have the option to repay the distribution within three years.
Automatic portability transactions: This provision would permit a retirement plan service provider to provide employer plans with automatic portability services. Such services involve the automatic transfer of a participant’s default IRA (established in connection with a distribution from a former employer’s plan) into the participant’s new employer’s retirement plan unless the participant affirmatively elects otherwise.
Higher catch-up limit at age 60: This provision would permit participants to elect to contribute an additional $10,000 (indexed) annually beginning between age 60 and 63 ($5,000 for Simple plans) and would be effective after 2023.
Domestic abuse penalty-free withdrawals: The provision would waive the 10% additional tax that
applies to early distributions from tax-preferred retirement accounts (e.g., 401k plans and IRAs) in the case of eligible distributions to domestic abuse victims. Eligible distributions are capped at $10,000 (or 50% of the account balance if lesser) and may be re-contributed to a tax-preferred retirement account.
A section-by-section summary of the EARN Act is found HERE.
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