It's widely agreed that SECURE 2.0 is set to become law in 2022, despite differences between the House version, which was approved in late March 2022, and the Senate version, which was approved in 2021.
SECURE 2.0—so-called because it builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019—is designed to substantially improve retirement savings accounts, including 401(k)s and 403(b)s, in the U.S. While the bill does not address Social Security, the House version of the bill has been estimated to raise revenue by $158 million through 2031.
Both versions of the bill enjoy broad, bipartisan support and support three overarching goals: get people to save more for retirement, improve retirement rules, and lower the employer cost of setting up a retirement plan. One of the most popular aspects of both bills is a provision that would allow employers to make matching contributions to employees paying off student loans instead of contributing to a company-sponsored 401 (k). Other overlapping provisions include:
A searchable national lost–and–found registry for missing retirement funds.
Indexing individual retirement account (IRA) catch-up contributions in the same way regular IRA contributions are indexed.
A provision to allow small financial incentives for contributing to a 401(k) or 403(b) plan
A provision permitting annuities to provide certain payments, such as lump-sum payments and annual payment increases of less than 5% annually
A reduction in the penalty for failure to withdraw required minimum distributions (RMDs) from 50% to 25%.
There will be several barriers to reconciling the two versions of the bill. The key differences include:
The House version includes an auto-enrollment mandate; the Senate version does not.
The House increases the RMD age to 73 (2022), 74 (2029), and 75 (2032). The Senate increases the RMD to 75 in 2032, and waives RMDs for anyone with less than $100,000 in retirement savings account while also reducing the RMD penalty.
The House expands the catch-up provision for individuals ages 62-64; the Senate version would apply the catch-up provision to anyone over age 60 and does not phase out at age 65.
Both versions would remove the 25% cap on qualified longevity annuity contracts (QLACs), but the Senate would allow a maximum amount of $200,000, adjusted for inflation, while the House would allow $135,000.
Despite the obvious gap in failing to address Social Security, SECURE 2.0 seems poised to pass in 2022. If you want to talk through what SECURE 2.0 means for you, your financial goals, and your business plan, contact the Robin S. Weingast & Associates team today.
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