Retirement Savings: SECURE Act Moving
by Dani Kehoe, Counsel to NAIFA
It was a busy week last week, and the first part of this week will be busy, too. Here’s where we are on our issues as of now.
Retirement Savings: The House Ways& Means Committee unanimously (by voice vote) approved H.R.1994, the SECUREAct—the new version of last year’s Retirement Enhancement Savings Act (RESA). It is now ready for a vote in the full House. The bill includes the open MEP (multiple employer pension plan) provisions that were in the Kind-Kelly bill(H.R.1993) as well as the new safe harbor, annuity, and other provisions (like,for example, the rule that eliminates the age restriction on contributions to traditional IRAs) from “the old RESA.”
Also, the leaders of the Senate Finance Committee (SFC), Chairman Sen. Chuck Grassley (R-IA) and Ranking Member Sen. Ron Wyden (D-OR), introduced their updated version of RESA, S.972. S.972 is nearly identical to the RESA bill of last year. It has updated effective dates and includes the stretch IRA offset that had been dropped from last year’s Family Savings Act/H.R.88.
There are a few key differences between the two bills. For example, the SECUREAct contains a provision to make long-time (3 years of service or more)part-time workers (those who work 500 hours/year) eligible to participate in the employer’s retirement savings plan (with provisions to prevent difficulty with nondiscrimination rules as a result of including part-timers in the plan). It also contains a provision expanding section 529 rules to allow 529 funds to be used for homeschooling.
The two bills take different approaches to the stretch IRA offset provision.The SECURE Act requires distribution (and tax paid) of most inherited IRA and401(k) account balances within ten years of inheriting. S.972 requires distribution (and tax paid) within five years but exempts $400,000 per heir from that five-year stretch requirement. The SECURE Act also contains a newspaper pension provision that is not in the Senate bill—that provision,while largely irrelevant to NAIFA interests, is key politically—it was the failure to include that provision in RESA last year that caused the bill to be blocked from Senate floor consideration.
Now, House and Senate tax writers and leadership must resolve those differences, something that may prove challenging.
Strategy is still being worked on, but as of now, the Ways & Means Committee is whipping the SECURE Act “as is.” They want a House floor vote soon—some time in May. They are encouraging the retirement savings community to vigorously lobby for enactment with as large a bipartisan vote as possible. NAIFA is participating in this effort.
On the other side of the Capitol, SFC personnel say the committee does not intend to mark up S.972; rather, they expect to pre-conference their bill with the SECURE Act and take the resulting compromise directly to the Senate floor.Again, they are shooting for a vote in May, although key personnel acknowledge that timing could slip—perhaps to as late as this fall when the package could be added to the fiscal-year-end spending bill.