The House on March 29, 2022, passed a bill that now heads to the Senate for consideration and possible modification. It is known as SECURE 2.0. Previous retirement legislation known as the SECURE ACT was passed in late 2019. These are legislative attempts to encourage and support increased retirement savings for the US workforce.
RMD Age increasing
As reported by Paychex.com, the bill would raise the required minimum distribution (RMD) age 72 to 75 — with a phase-in option through 2033 to reach the upper age limit — allowing older workers to save longer. The age had been 70 ½ until the first SECURE ACT passed.
Increased ‘catch-up’ amounts
The bill has new “catch-up” contribution amounts proposed: for those 50 and older, the amount would be increased from $6,500 to $10,000 for an employer-sponsored 401(k) and 403(b). It provides for an additional $5,000 for SIMPLE plans (from $3,000). These would be indexed for inflation.
Student Loan Debt
To address student loan debt, instead of contributing to a 401(k) or other type of retirement plan, employees can opt to make contributions that go toward paying off their student loans. These contributions would still be eligible for employer matching.
Part-Time worker plan participation
Part-time workers would be eligible for an employer-sponsored retirement plan, previously available only to full-time employees.
Paychex also reported that a new provision for automatic enrollment in a retirement plan is designed to make it easier for employees to participate. Smaller businesses with 401(k) and 403(b) plans would automatically enroll employees.
Employees who prefer not to participate can opt out. The initial enrollment amount is 3% of salary with an incremental increase of 1% annually until the limit of 10% is reached. There is an exception for small businesses with 10 or fewer employees, new businesses less than 3-years-old, churches, and government agencies. Businesses could integrate automatic enrollment with payroll.
As of this writing, it is unknown what – if any – of these and other House provisions will survive Senate deliberations and action toward final legislation.