On Thursday, May 23, the U.S. House of Representatives approved a retirement savings package that Senate tax writers have waited to take up for action.
The Setting Every Community Up for Retirement Enhancement (SECURE Act, H.R. 1994) passed 417-3. Congress designed the proposed legislation, with bipartisan support, to improve existing retirement plans and promote the creation of new plans. The House version includes a technical correction to the 2017 Tax Act that removes tax increases on military survivors benefits. Both parties agree on the need to fix this issue.
Noteworthy provisions in the bill include:
- An increased auto-enrollment safe harbor cap and simplified safe harbor 401(k) rules;
- Raising the age for taking required minimum distributions from 70½ to 72;
- Allowing employers to join a pooled arrangement (open Multiple Employer Plans) that permits different types of employers to collectively offer a plan to their employees (as discussed in the Tax Group article posted on September 12, 2018);
- Repeal of the prohibition on contributions to a traditional IRA by a person who has reached age 70½;
- Portability of lifetime income options from one plan to another, thus permitting retirement plan participants to keep their lifetime income investments and avoid surrender charges and fees;
- An automatic enrollment credit for small employers;
- Increasing the start-up credit for small employer retirement plans.
The House version removed revisions to education savings rules for Section 529 plans, including tax savings for homeschooling costs and costs of primary and secondary education, from the final version. The Senate may keep these revisions in their version.
The Tax attorneys at Woods Rogers will continue to watch the legislation as these retirement plan improvements move toward enactment. If you have questions, please contact a member of the Tax Group.