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On October 27, 2020, the Ways and Means Committee introduced the Securing a Strong Retirement Act of 2020. This is a bipartisan retirement bill from Rep. Richard Neal (D., Mass.), chairman of the House Ways and Means Committee, and Rep. Kevin Brady (R., Texas), the panel’s top Republican. The bill is designed to build on the SECURE Act that was enacted last year.(1) (2) (3)
A sampling of the provisions in the proposed bill include:
· An age increase for Required Minimum Distributions (RMDs) from the current age 72, to age 75
· Eliminating RMDs if the total balance of IRAs and retirement plans are not more than $100,000 on December 31 of the year before they attain age 75
· An increase of IRA Qualified Charitable Distributes from $100,000 to $130,000
· Permitting Qualified Charitable Distributes from 401(k)s as well as IRAs
· Allowance for a one-time election for Qualified Charitable Distributes charitable gift annuities, charitable remainder unitrust, and charitable remainder annuity trusts
· Indexing IRA catch up limit of $1,000 beginning in 2022
· Increasing catch-up contributions for retirement plans for participants age 60 and older from $6,500 and $3,000 for SIMPLE plans, to $10,000 and $5,000. They would both be indexed
· Reduction of the penalty for those who fail to take a required distribution
· Permitting an employer to make matching contributions under a 401(k), 403(b), 457(b), and SIMPLE Plan, to “qualified student loan payments”
· Under the SECURE act, a part time employee would be eligible for a 401(K) if they either completed:
o one year of service with the 1,000 hour rule or
o three consecutive years of service where the employee worked a least 500 hours. The new Act would reduce the three year rule to two years.
· The measure also makes it mandatory for automatic enrollment in plans from employers who have more than 10 workers, have been in business for three or more years, and offer a newly created 401(k), 403(b), or Simple plan. The employees would be able to opt out.
· Provides larger credit for small employee pension plan start-ups
· Would allow 403(b) plans multiple employer plans (MEPs)
· Extends Employee Stock Ownership Plan (ESOP) benefits to S corporations
What’s Missing?
The previous Retirement Enhancement and Savings Act 2019 (RESA) which also provided a provision to move RMDs from age 72 to age 75, intended to pay for this by shrinking the non-spousal stretch from the current 10 years under the SECURE Act to 5 years. I could not find any mention of this in either the bill’s summary, the detailed section by section description, or the actual bill, all of which you can access below.
Sources:
(1) Bill Summary
(2) Detailed Section by Section Description
(3) Actual Bill
Disclosure:
This document is provided for informational purposes only by Dunham & Associates Investment Counsel, Inc. solely in its capacity as a Registered Investment Adviser and should not be construed as legal and/or tax advice. Dunham & Associates Investment Counsel, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.