Elizabeth Frantz | Reuters
Two years after Congress passed a law that ushered in improvements to the U.S. retirement system, lawmakers’ efforts to make further enhancements are moving forward — albeit slowly.
There’s bipartisan backing for measures in both the House and Senate that would build on the 2019 Secure Act, which aimed to increase both the ranks of savers and retirement security. While progress on the proposals has been slow, there’s hope for action in 2022, say supporters.
“At the end of the first quarter or beginning of second quarter, we could see action on the bills in both chambers,” said Paul Richman, chief government and political affairs officer at the Insured Retirement Institute.
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Most recently, the House Education and Labor Committee last month approved the RISE Act (H.R. 5891), a series of retirement-related provisions that fall under its jurisdiction. It has some overlap with another bill — the so-called Secure Act 2.0 (H.R. 2954), which cleared the House Ways and Means Committee in May. Both were approved unanimously by voice vote.
Meanwhile, there are two bills in the Senate that are similar to those in the House: the Retirement Security and Savings Act (S. 1770) and the Improving Access to Retirement Savings Act (S. 1703). However, neither have received committee consideration yet.
Here are some of the main provisions that are covered in the bills.
Required minimum distributions
The Secure Act changed when required minimum distributions, or RMDs, from retirement accounts must begin to age 72, from 70½. Under the House proposal, those mandated annual withdrawals wouldn’t have to start until age 73 in 2022, and then age 74 in 2029 and age 75 by 2032.
Similarly, the Senate proposal would raise the RMD age to 75 by 2032. It also would waive RMDs for individuals with less than $100,000 in aggregate retirement savings, as well as reduce the penalty for failing to take RMDs to 25% from the current 50%.
Current law allows retirement savers age 50 or older to make so-called catch-up contributions to their retirement savings. On top of the standard annual contribution limits — $19,500 for 401(k) plans and $6,000 for individual retirement accounts in 2021 — those who qualify can put an extra $6,500 in their 401(k) or $1,000 in their IRA.
Both the House and Senate proposals aim to expand those amounts, although the specifics differ a bit.
The House provision would adjust annual catch-up amounts based on inflation, and would expand the 401(k) catch-up to $10,000 for individuals who are age 62, 63 or 64. Workers enrolled in so-called SIMPLE …….