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Proposed changes to the pension system are still on the table in Congress

Élisabeth Frantz | Reuters

Two years after Congress passed a law that ushered in improvements to the U.S. pension system, lawmakers’ efforts to make further improvements are advancing, albeit slowly.

There is bipartisan support for measures in both the House and Senate that would build on the Secure Act of 2019, which aimed to increase both saver ranks and pension security. Although progress on the proposals has been slow, there is hope for action in 2022, supporters say.

“At the end of the first quarter or early in the second quarter, we could see action on the bills in both houses,” said Paul Richman, director of government and policy affairs at the Insured Retirement Institute.

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More recently, the House Education and Labor Committee last month approved the RISE Act (HR 5891), a series of retirement provisions that fall under its purview. It has some overlap with another bill – the so-called Secure Act 2.0 (HR 2954), which authorized the House Ways and Means Committee in May. Both were approved unanimously by voice vote.

Meanwhile, there are two bills in the Senate that are similar to those in the House: the Retirement Savings and Security Act (S. 1770) and the Improved Access to Health Care Act. retirement savings (S. 1703). However, neither has yet been considered by the committee.

Here are some of the main provisions covered by the bills.

Minimum required distributions

The security law changed when minimum required distributions, or RMD, from retirement accounts are to begin at age 72, starting at age 70 and a half. According to the House proposal, these mandatory annual withdrawals should not start until the age of 73 in 2022, then 74 in 2029 and 75 by 2032.

Likewise, the Senate proposal would raise the age of RMD to 75 by 2032. It would also remove RMD for people with less than $ 100,000 in overall retirement savings, as well as reduce the default penalty. take the RMD at 25% compared to the current 50%. .

Catch-up contributions

The current law allows savers aged 50 or over to pay so-called catch-up contributions to their retirement savings. In addition to the standard annual contribution limits – $ 19,500 for 401 (k) plans and $ 6,000 for individual retirement accounts in 2021 – those who qualify can put an additional $ 6,500 in their 401 (k) or 1. $ 000 in their IRA.

The House and the Senate the proposals aim to increase these amounts, although the details differ a bit.

The House’s provision would adjust the annual catch-up amounts for inflation and extend the 401 (k) catch-up to $ 10,000 for people aged 62, 63 or 64. SIMPLE Packages would be entitled to $ 5,000 in catch-up contributions, compared to $ 3,000 currently.

The Senate provision would also index the IRA amount to inflation, but is more generous with the $ 10,000 401 (k) catch-up contribution: it would apply to people aged 60 or over.

The House’s proposal would also change the tax aspect of the catch-up amounts to compensate for lost income resulting from other provisions.

At the end of the first quarter or the beginning of the second quarter, we could see the action on the bills in both houses.

Paul richman

Head of Government and Political Affairs at the Institute for Insured Retirement

That is, all catch-up contributions to 401 (k) and other plans would be treated as Roth contributions, i.e. after tax. Current law allows workers to choose to make these contributions on a pre-tax or Roth basis (assuming their company gives them a choice).

Additionally, employer matching contributions can currently only be paid into pre-tax accounts. A provision in the House would allow them to be after-tax (Roth) contributions if the employee wanted to go that route.

Student loan debt

Most companies that offer 401 (k) plans will match your contributions up to a certain amount – for example, a 100% match for the first 3% you contribute, with a 50% match for the next 2%. . For workers whose student loan debt keeps them from putting money into their retirement accounts, it means running out of company money.

In the House and Senate provisions, employers would be allowed to make contributions to 401 (k) plans (and similar work plans) on behalf of employees who make student loan repayments instead of contributing to their plan. of retirement.

Automatic registration for 401 (k) plans

A House provision would require employers to automatically enroll employees in their 401 (k) plan at a rate of at least 3%, and then increase it annually until the worker contributes 10% of their plan. salary. Companies with 10 employees or less and new companies (less than 3 years old) are among those that would be excluded from the mandate.

The Senate version does not require automatic registration, although it does include incentives to encourage businesses to implement this feature.


One option for providing a stream of income later in life is a Qualified Longevity Annuity Contract, or QLAC. Once you’ve purchased the annuity, you specify when you want the income to begin.

However, the maximum that can go into a QLAC is $ 135,000 or 25% of the value of your retirement accounts, whichever is less.

There are provisions in both the House and Senate that would remove the 25% cap. The Senate would also increase the maximum amount allowed in a QLAC to $ 200,000.

Other things

The House and Senate are both proposing to create a national online database of lost and found items for retirement accounts, which workers can lose track of after leaving their jobs.

In addition, under the provisions of both chambers, part-time employees who work at least 500 hours for two consecutive years would be eligible to participate in their company’s 401 (k) plan.

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