By Nick Fortuna
Jan. 4, 2022
Bipartisan legislation aimed at helping Americans build their retirement savings, which bogged down in 2021, has better prospects in 2022, according to those in the financial-services industry.
The legislation would expand automatic enrollment of workers in employee-sponsored savings plans and delay the age when retirees must begin taking distributions from them.
The Securing a Strong Retirement Act of 2021, sometimes called the Secure Act 2.0, passed the House Ways and Means Committee by unanimous vote in May, setting it up for a vote on the House floor. The bill subsequently stalled as Washington’s focus shifted to President Biden’s Build Back Better proposal, a multitrillion-dollar spending bill.
Diane Boyle, senior vice president for government relations at the National Association of Insurance and Financial Advisors, said she’s “optimistic that it’ll get passed” in 2022. The bill was put on hold as Democrats considered including broad retirement savings provisions in the Build Back Better legislation, components that appear to have been scrapped, she said.
The Securing a Strong Retirement Act was introduced by U.S. Rep. Richard Neal (D-Mass.), whose office declined to comment on the bill’s status. J.P. Freire, spokesman for the Republicans on the House Ways and Means Committee, said they “hope to return to making progress” on the bill in 2022.
“Unfortunately, Democrats jeopardized the hard work of both parties by jamming partisan provisions into their tax-increase and spending bill,” Freire said. “As a result, we now have to wait to find out what actually gets passed, if anything. We remain confident that the bipartisan work in the Securing a Strong Retirement Act is the best path forward.”
Among other things, the Securing a Strong Retirement Act would:
- Expand automatic enrollment of workers in employer-sponsored retirement saving plans. Employees would be automatically enrolled in plans such as 401(k)s and 403(b)s unless they opt out. Workers’ initial automatic contributions would be between 3% and 10% of pretax earnings, and that amount would be increased by 1% each year until reaching 10%.
- Raise the age at which seniors must take required minimum distributions (RMDs) from their retirement savings accounts to 73 from 72. The bill subsequently would raise the age to 74 starting in 2029 and to 75 starting in 2032.
- Reduce the penalty for failure to take RMDs to 25% from 50%. In addition, if this failure is corrected in a timely manner, as defined by the bill, the penalty would be further reduced to 10%.
- Increase the limits on so-called catch-up contributions for employees ages 62 to 64. In 2021, these workers were allowed to contribute up to $6,500 to their retirement savings plans beyond the otherwise applicable limits. This bill would increase that amount to $10,000 and index it to inflation.
- Index the catch-up contribution limit for individual retirement accounts to inflation. Currently, savers ages 50 and up may contribute an additional $1,000 annually to their IRAs, but that limit isn’t indexed to inflation.
- Allow employers to match a worker’s student loan payment by making an equivalent contribution to that worker’s retirement savings plan. This provision is intended to help workers who can’t afford to save for retirement because of high student-loan debt, which causes them to miss out on their employers’ matching contributions to retirement savings plans.
Sens. Rob Portman (R-Ohio) and Ben Cardin (D-Md.) have introduced similar legislation, the Retirement Security and Savings Act, which has yet to advance through the Senate Finance Committee.
Dan Zielinski, chief strategic communications officer for the Insured Retirement Institute, which represents life insurers, asset managers and others, said there is a “significant appetite” on Capitol Hill to pass a retirement savings bill. He said the Senate and House likely will coalesce around provisions that can pass both chambers of Congress, either as a stand-alone bill or as part of broader legislation.
Zielinski pointed to the Secure Act (Setting Every Community Up for Retirement Enhancement) of 2019, a similar bill signed into law as part of an appropriations bill for fiscal year 2020.
“Typically, these bills are attached to some larger vehicle to get through,” he said. “Step 1 is to get a consensus on a broad package for retirement security, and Step 2 is to identify potential vehicles that it can be attached to, and we’re pretty confident that we’ll see those opportunities arise. With the support that this issue has on both sides of the aisle, we’re fairly optimistic that it can get done in 2022.”
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