By Amber Kendrick Vice President, Retirement Plan Consultant, Procyon Partners, LLC
Americans saw a lot of changes to retirement savings when the Setting Every Community Up for Retirement Enhancement Act or the SECURE Act was passed a couple years ago. The Securing a Strong Retirement Act, nicknamed Secure 2.0, was introduced in 2020 by Ways and Means Committee Chairman Richard Neal (D-MA) and ranking member Kevin Brady (R-TX), which further expanded these changes.
There are over 30 provisions in the bill. Outlined below are key provisions for both employer retirement plans and individuals if the legislation becomes law.
Key provisions for employer plans:
- Permit 403(b)s to invest in collective investment trusts
- Increase the new plan start up credit to 100% of costs (rather than 50%) up to $5,000 for employers with 50 or fewer employees
- Provide a tax credit for small employers for employer contributions of up to $1,000 per employee for up to 5 years
- Permit employers to make matching contributions to plans on behalf of employees who are repaying student loans
- Require new 401(k), 403(b) and SIMPLE IRA plans to automatically enroll and automatically escalate participants (current plans would be grandfathered)
- Increase the catch-up amount for individuals age 60 or over to $10,000
Key provisions for individuals:
- Increase the starting age for required minimum distributions to 75
- Enhance the Saver’s Credit
- Increase the maximum credit amount to $1,500 (currently $1,000)
- Increase the adjusted gross income limits making more individuals eligible for the credit
- Establish an online mechanism that would allow individuals to search for benefit
- Exempt individuals with balances under $100,000 from the required minimum distribution rules
- Index the IRA catch-up amount (currently $1,000, unindexed)
- Permit qualified charitable distributions from qualified plans (currently only permitted from IRAs)
- Increase the limits for the purchase of qualifying longevity annuity contracts (QLACs) to the lesser of 100% of the account balance or $200,000 (currently the lesser of 25% or $135,000)
Source: JPM Guide to Retirement
While SECURE 2.0 focuses on boosting retirement security it will take a heavy lift to fix the retirement crisis. According to the National Institute on Retirement Security 75% of Americans agree the U.S. faces a retirement crisis. Furthermore, according to the Federal Reserve, 13% of non-retired employees over the age 60 have ZERO retirement savings!
The good news is Secure 2.0 is widely expected to pass either this year or in 2022, given its strong bipartisan support and the nearly unanimous backing of the original SECURE Act. Ideally, some of the provisions in the bill help close the retirement savings gap we as Americans agree is a major issue in this country.
To understand how this information may affect your personal situation, contact your CironeFriedberg professional at 203-798-2721 or 203-366-5876, or email us at info@cironefriedberg.com.
