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It is Best to Prepare for the Days of Necessity

A wise reminder from the old Aesop Fable and it appears Congress is indeed moving forward with pragmatic plans to help Americans improve their retirement savings prospects. Programs such as 401(k)s and IRAs were created to incentivize employees to save for the future but many folks find the products too complicated, intimidating or not available.

This is bipartisan retirement security legislation, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, H.R. 1994. The SECURE Act was introduced by House Ways and Means Committee Chairman Richard Neal (D-Mass.) as well as Rep. Ron Kind (D-Wis.), Ways and Means Committee Ranking Member Kevin Brady (R-Texas) and Rep. Mike Kelly (R- Pa.).

The effort includes important measures from a bill, the Retirement Enhancement and Savings Act, that was introduced in the previous Congress. This bill, however, didn’t make it out of committee.

So let's outline just a few of the major points of H.R. 1994 legislation and track progress over the weeks ahead.

Moving quickly to accomplish the goal of helping Future seniors better save for retirement is absolutely essential.

  • The Act relaxes stringent multiple employer plan rules (MEP) and would allow two or more unrelated employers to join a pooled employer plan with a specific pooled plan provider.
  • It increases the tax credit for small business employer plan start-up costs.
  • Long term part-time employees finally have access to 401(k) plans
  • It enhances safe harbor features of an annuity or lifetime income provider - this is important because many employees favor the idea of a regular, long term fixed payment investment but annuities are either unsafe, not available, complex or very high fee products.
  • The Age for required minimum distributions (RMDs) from retirement accounts is raised from 70 1/2 years to 72 years reflecting our longer lifespans.
  • Also, the plan allows employees to take out up to $5,000 from retirement accounts without penalty for a birth or adoption. This provision should be expanded to make it more helpful as a comprehensive $10,000 maximum "rainy day" fund for emergencies that any American could face in life.
  • The bill also includes an interesting element regarding 529 account savings which could now be applied to homeschooling, apprenticeships, and student loan expenses.

This legislation may not provide all the necessary comprehensive reforms, but it does begin a conversation in the 116th Congress on how to address obvious gaps in retirement legislation that need improvement. We will stay focused on encouraging a, hopefully bipartisan, resolution of this process if the SECURE Act moves forward.