The Current State Of The Secure 2.0 Retirement Act

There isn’t much time left for lawmakers to Pass the Secure 2.0 Retirement Act. After the November elections, lawmakers will make a final effort to approve Secure 2.0, the most important retirement reforms Congress has contemplated in years.

Advocates hope that the law, which would, among other features, increase the age for mandated minimum distributions and extend access to employer 401(k) plans, would pass by the end of the year. However, the outcome of the midterm elections might derail the legislation and extend the deadline.

Legislators have been working on finishing Secure 2.0, which expands on the Secure Act of 2019, and they are likely to increase their efforts following the midterm elections on November 6. The term encompasses three measures — one from the House of Representatives and two from the Senate — that must be reconciled into a single bill. One of the primary clauses would raise from 72 to 75 the age at which mandatory minimum withdrawals must be taken from retirement funds. This policy would primarily affect the minority retirees who can afford to wait. This modification would let them defer withdrawals and the taxation of those withdrawals.

The initiative enjoys bipartisan support, with legislators from both parties committed to addressing the retirement problem in the United States. Nonetheless, commentators assert that its adoption during the lame-duck session is not a sure conclusion. Observers predict that if the Republicans recover one or both chambers of Congress, the party will want to avoid adopting any substantial policy changes until it resumes the reins of power in early January. On the other side, some of the measure’s sponsors are retiring, which might motivate Congress to pass the bill in 2022.

Michael Kreps, the co-chair of Groom Law Group’s senior services group, remarked that it’s tough to foresee what Congress will look like and want to accomplish after the election.

If lawmakers reach an agreement, Secure 2.0 is anticipated to be attached to another bill slated for a vote before the end of the year and ride along on its passing. If that does not occur, the measure might be reintroduced and go through the parliamentary process again the following year, but it would take time. And in that event, it may take a back seat to topics that dominated the election, Kreps added.

Supporters are optimistic that Secure 2.0 will pass this year and avoid this scenario.

Yes, there is red tape; that’s how Washington, D.C. works, said Tonya Manning, chief actuary and wealth practice leader at Buck, a consulting firm for benefits and pensions. At the end of the day, though, there are things that everyone can support.

Here are some of the law’s most important provisions:

Raise from 72 to 75 the age at which required minimum distributions must be made from retirement savings. The House version of the measure would raise the eligibility age to 73 on January 1, 2024, 74 on January 1, 2030, and 75 on January 1, 2033. The Senate would raise the age to 75, commencing January 1, 2032.

Raise the catch-up contribution ceiling to $10,000 from the existing $6,500 ($7,500 in 2024). The House measure would apply to those aged 62 to 64 beginning with the 2024 tax year, and the Senate version would increase the age restriction to 63 starting with the 2025 tax year.

Make catch-up payments after taxes; the Senate version would enable savers with incomes below $100,000 to choose whether their catch-up contribution is made before or after taxes.

Index the $1,000 catch-up contribution to individual retirement accounts to inflation beginning with the tax year 2024 (House plan) and subsequent tax years (Senate bill).

Beginning in 2024, employers with 401(k) plans must allow part-time workers to enroll with 500 hours of service in two consecutive years.

Increase tax credits for small firms that provide specific 401(k) plans.

Effective 2024 (House) and 2024 (Senate), let employees earn matching employer contributions to their 401(k) by making student loan installments (Senate).

Change the saver’s credit, which gives some low- and moderate-income savers a tax credit for contributing to their IRA; the Senate version would change it from a nonrefundable credit paid in cash to a government matching credit that must be deposited into an IRA, effective 2027; the House version would simplify the credit by standardizing the rate across incomes, effective for tax years beginning after 2026.