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Congress May be Changing Your Retirement Plan

Congress may actually be passing legislation. In May 2019, the House of Representatives passed, by a 417-3 margin, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The Senate has not yet voted on a similar bill, the Retirement Enhancement and Savings Act (RESA). If the House and Senate reconcile and pass the bill and the President signs it, I’m proposing a new name (WTFGSD) When They Finally Got Something Done Act.

The objective is to give more people access to retirement plans. As you would expect, there are some good things and some not so good things. Here are the bullet points:

Good

  • Employers could contribute up to 15% (currently 10%) to their employee’s 401(k) plans.
  • Part-time employees who work at least 500 hours three years in a row could participate in their employer’s 401(k) plans.
  • No age limit for IRA contributions. Under current law, you can’t contribute to your IRA
    after age 70 1/2.
  • Required minimum distributions would start at age 72. Currently, it is age 70 1/2. The Senate act would raise the required minimum distribution age to 75.
  • Employers could join with other employers create multi-employer retirement plans to reduce costs and offer better retirement plans.

Not So Good

  • No more Stretch IRA. Those who inherit IRAs could no longer stretch-out the IRA distributions over their lifetime and reap the benefits of tax deferred growth. Under the proposed bills, an inherited IRA would have to be distributed out in ten years.

There are no guarantees that the bills will pass. The Senate version is now in the Senate Finance Committee. But with a 417-3 House vote, chances are good that soon there will be changes to your retirement plan.

 

 

 

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