Senate Finance Committee Chairman Chuck Grassley of Iowa today praised the passage of the SECURE Act in the House of Representatives.
“The SECURE Act, which passed today in the House of Representatives and includes my Retirement Enhancement and Savings Act, takes an important step forward to help encourage and facilitate retirement savings. It also includes an important fix to eliminate unintended effects of the tax law on children with unearned income, such as Gold Star families and students who earn scholarships and grants,” Grassley said. “This legislation is an example of bipartisan cooperation to solve issues on behalf of Americans. I appreciate the hard work of my colleagues in the House and look forward to its quick passage in the Senate.”
The SECURE Act is legislation largely based on the Retirement Enhancement and Savings (RESA) Act of 2019, legislation Grassley introduced earlier this year with Ranking Member Ron Wyden of Oregon. Both bills share reform proposals to increase retirement savings in several ways, including:
- Improving an existing type of retirement plan called a “multiple employer plan” or MEP. Such plans would be expanded to make it easier for small employers to join together to sponsor a single retirement plan for their workers. This would help millions of Americans save for retirement, and reduce plan-administration costs for small businesses;
- Helping workers to ensure they have adequate income in retirement by creating new rules for employers that offer lifetime-income arrangements in their retirement plans;
- Enhancing the ability of employees to transfer their retirement plan assets to a new retirement plan when they change jobs;
- Encouraging employees to increase their retirement savings annually through automatic increases in contributions to 401(k) plans and requiring employers to provide estimates of how much an employee’s account would provide during retirement if it were invested in an annuity; and,
- Continuing to allow an employee to pass a limited amount of an IRA or 401(k) account to a family member or other beneficiary to permit the beneficiary to continue the tax-deferred saving for retirement.
Among its additions to RESA, the SECURE Act increases the age for taking required minimum distributions from 70½ to 72. It also includes proposals to require businesses offering retirement plans to cover certain part-time workers, allow penalty-free withdrawals from retirement accounts to cover birth and adoption expenses, expansion of 529 savings plans to cover apprenticeship programs and certain student loan payments and changes to help certain home health worker increase retirement-plan contributions.
Notably, the SECURE Act also includes an amendment that addresses unintended consequences of reforms to the “Kiddie Tax,” to ensure middle-class families with children receiving unearned income are not subject to tax rates intended to prevent wealthy parents from taking advantage of their child’s lower rate. This amendment applies broadly, but in particular will benefit families who have children with income from military survivor benefits, applicable Native American tribal payments, Alaska permanent fund dividends and certain scholarships and grants.