More SECUREMay 12, 2021 -
Categorized in: IAG News
Last week the House Ways and Means Committee approved a bipartisan (yes, you read that correctly) bill that makes significant changes to retirement planning.
The Securing a Strong Retirement Act of 2021 (H.R. 2954) is a sequel to the SECURE Act of 2019 which also passed with strong bipartisan support. Its nickname is SECURE Act 2.0 as lawmakers are hoping it will pass with the same ease.
As you may recall, the 2019 SECURE Act made significant changes such as increasing the age at which Required Minimum Distributions (RMDs) must begin to age 72 and limiting the life of inherited retirement accounts to 10 years. The SECURE Act 2.0 also includes some impactful provisions that could alter your financial plan if it is signed into law.
Please keep in mind that this bill is still a very long way from becoming law and it will likely change as it twists and turns through the legislative process, but it gives us a glimpse of where Democrats and Republicans could agree on changing retirement rules.
Here are some of the provisions they included in SECURE Act 2.0 as of last week:
- Increase the age that RMDs must begin from retirement accounts. Currently RMDs begin in the year you turn 72. This bill would gradually increase that to age 73 in 2022, age 74 in 2029, and age 75 in 2032.
- Raise the limit on retirement plan catch-up contributions for taxpayers age 62, 63, or 64 to $10,000 for 401(k) and 403(b) plan with a smaller increase for SIMPLE IRA plans.
- Require catch-up contributions for most retirement plans to be designated as Roth contributions.
- Permit employees to designate employer matching contributions as Roth contributions for most retirement plans.
- Allow employers to provide employees with a matching retirement plan contribution for making student loan payments.
- Require newly established 401(k) plans to automatically enroll eligible employees with a minimum 3% contribution, and then automatically increase their contribution by 1% per year until it reaches 10%. Employees may opt out of contributing.
- Expand SEP IRA and SIMPLE IRA retirement plan to include Roth options for employee contributions.
- Create a new national online “lost and found” for retirement plans operated by the Department of Labor.
- Permit a one-time $50,000 Qualified Charitable Distribution to a charitable remainder trust or similar split-interest entity.
- Allow penalty-free withdrawals from retirement accounts for victims of domestic abuse up to the lesser of $10,000 or 50% of their account value.
We will continue to closely monitor any changes that Congress makes to your retirement accounts and update your financial plan as needed to potentially reduce your tax burden.
Quote of the week: Stan Van Gundy: “Coaches are going to adapt to whatever the rules are. The rules certainly change the strategy.”
Source: House Ways and Means Committee
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