In December 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed and made significant changes to retirement for Americans.
Now there is a new bipartisan bill working its way through Congress. Dubbed “SECURE Act 2.0,” this new legislation could impact when workers are required to begin taking their required minimum distributions (RMDs). This in turn affects your financial planning for later in life, and could have an impact on your estate planning if you have bequests or distributions you wish to make.
Barron’s reported in June that “the bill that passed the House pushes back the age at which seniors must begin taking RMDs to 73, so long as they turn 72 after Dec. 31, 2022. The Secure Act 2.0 further increases the age for initial RMDs to 74 starting in 2030 and to 75 starting in 2033.”
The bill also creates a mandatory enrollment requirement. SECURE ACT 2.0 would require employers to automatically enroll new employees as they become eligible, if the employer establishes defined contribution plans after 2021. It also specifies (currently) that the employer must enroll the employee in a plan at a pretax contribution level that is at least 3% of the employee’s pay. Employees have the option to choose a higher contribution, but it seems there is a minimum selection of 3%. The goal from this mandatory enrollment is to increase the number of Americans who are actively saving for retirement.
Another significant change is the SECURE Act 2.0 would expand eligibility for long-term, part-time workers to participate in an employer’s retirement plan. Currently, the only options for these workers are to have a Roth retirement account or to have no contributions at all. Traditionally, 401(k) and some other types of retirement accounts have only been offered to full-time employees. The new bill would expand access and allow those who do not work full-time access to these retirement saving options.
Additionally, the bill would allow people with student loans to make payments on those loans in lieu of contributions to their workplace retirement plans and still receive their employer match. That helps people to pay down debt and save for retirement at the same time.
A few sites have additional information:
- SHRM, which is also updating their article as the bill moves through Congress. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/congress-considers-a-new-round-of-retirement-legislation.aspx
- TIAA (PDF), breaking down components of the bill. https://www.tiaa.org/public/pdf/c/Consultant_SECURE_Act_Summary_Flyer.pdf
- gov, text of the bill HR2954. https://www.congress.gov/bill/117th-congress/house-bill/2954/text
If you have any questions, ask your estate planning professional or financial planning professional for advice. They will be more than happy to help