The second major piece of retirement legislation passed the House on Tuesday. One of the main goals of the bill is to help more Americans save for retirement at all stages of their careers. This bill still has to go through the Senate so stay tuned. Here are some of the key provisions…

RMDs pushed back to age 75
The bill would raise the age individuals are required to begin withdrawing a percentage of their tax deferred retirement accounts to 75 from 72 over the next decade.

The change would affect individuals who attain age 72 after December 31st, 2022. RMDs would start at 73 from 72 effective January 1st, 2023. The bill would raise the age to 74 starting in 2030 and to 75 starting in 2033.

Automatic Enrollment in Retirement Plans
The SECURE Act 2.0. would require 401(k) and 403(b) plans to automatically enroll participants. The initial contribution would be 3% and would increase by 1% until it reaches 10%. Employees would have the option to opt out or adjust contributions.

There would be no change to plans already in place. This would apply to plans created after December 31, 2023.

Student Loan Matching
The proposal would allow an employer to make contributions to a retirement plan based on the employee’s student loan payments. By doing this, individuals can receive their match and be able to pay down student loan debt.

Increase Catch-Up Contributions
Another provision would increase catch-up contributions to employer retirement plans for individuals ages 62, 63, and 64 from $6,500 to $10,000. This contribution would be indexed for inflation.

For IRAs, the catch-up contribution is currently $1,000 annually, but that limit is not indexed to inflation. With the new bill, the contribution would be indexed for inflation.

Catch-Up Contribution Required to be Roth
Under current law, catch-up contributions to qualified retirement plans can be made on a pre-tax or Roth basis. Starting 2023, all catch-up contributions to qualified retirement plans would be subject to Roth tax treatment.

Roth Retirement Plan Match
With this bill, there would be an option for employer matching contributions to be made into the Roth portion of retirement plans. Typically, matches go into employer’s pretax 401(k) account. So, for someone who is young and in a low tax bracket but expects to be in a higher one in the future, this option could be helpful.

Online Lost & Found for Retirement Benefits
The proposal would create an online searchable database at the Labor Department to help workers and retirees find their lost retirement accounts.

George Maroudas
Twitter @ChicagoAdvisor

Disclaimers and Sources:

House passes ‘Secure Act 2.0’ Here’s what that means for retirement savings from CNBC
House approves SECURE 2.0 with strong bipartisan vote from InvestmentNews
Secure 2.0 Set for House Vote This Week from NAPA

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