The next two weeks will be tense for backers of legislative measures to enhance the U.S. retirement system. Next week, lawmakers will return to Washington to conclude the so-called lame-duck session – the legislative time between the midterm elections and the start of the new Congress on January 3. Although no particular agenda has been announced yet, proponents of the retirement-change ideas, generally known as “Secure 2.0,” are optimistic that it will be among the bills that pass.
Paul Richman, the chief government and political affairs officer at the Insured Retirement Institute, stated that all indications point to Congress taking action before their departure, but nobody knows the specific day and time.
Secure 2.0 aims to expand on the retirement system changes brought in by the Secure Act of 2019. These reforms included expanding access to retirement benefits for part-time workers and increasing the minimum payout age for some retirement funds from 70.5 to 72 years old.
Some measures are backed by both the House and the Senate.
This time around, some of the initiatives that are supported in both the House and Senate include:
- Facilitating employees’ ability to save and access emergency money.
- Expanding the availability of the so-called saver’s tax credit, which is offered to employees with low and moderate incomes.
- Increasing the catch-up contributions people over 50 can make to their retirement savings accounts.
- All catch-up contributions must be Roth (post-tax) contributions.
- Letting part-timers qualify for their company’s 401(k) if they have worked at least 500 hours in two years instead of three.
- Facilitating corporate contributions to 401(k) plans for employees who are paying off student debts rather than preparing for retirement.
RMDs
The age at which you are required to withdraw will increase by three years to 75. The current 50% penalty for failing to take RMDs would be reduced to 25% and, in some situations, to 10%.
QLAC
Permitting individuals to invest additional funds in a qualified longevity annuity contract, or QLAC.
Before a final package could be considered, differences between the House-passed law and the Senate’s recommendations would need to be resolved, according to Richman. This process is now happening.
The House approved its version of Secure 2.0, the Securing a Strong Retirement Act (H.R.2954), by a bipartisan vote of 414-5 in late March this year.
Senate committees with authority over retirement-related measures have accepted recommendations that combined comprise the Secure 2.0 version of that chamber. In June, the Health, Education, Labor, and Pensions Committee advanced the so-called Rise & Shine Act (S.4353), and in September, the Finance Committee passed the EARN Act (S.4808).
Secure 2.0 might be appended to a law that must be passed.
With the expectation that Secure 2.0 would not receive floor time for a vote on its own, proponents are hopeful that legislators would attach it to a must-pass package this year. This might contain a government funding measure.
In September, Congress approved a temporary measure to fund the government’s fiscal year 2024, which began on October 1 and ended on December 16. A funding package for the remainder of the fiscal year or another short-term stopgap measure would need to be passed to prevent a government shutdown.
The original 2019 Secure Act was finalized as part of a budget package in December of that year. Richman stated that other laws, such as the National Defense Authorization Act, may potentially be acceptable for Secure 2.0 to be appended to.
If this batch of suggested amendments does not become law this year, Congress must restart the entire legislative process.
“No one wants to witness that,” remarked Richman. It is a lengthy procedure to reintroduce measures, pass them through committees again, and bring them to the floor for a vote.