Retirement Savings Plans,For Individuals,For Plan Sponsors,Custom

Retirement Legislation Watch

April 9, 2019

In December 2018, Senators Rob Portman (R-OH) and Ben Cardin (D-MD) introduced the bi-partisan Retirement Security and Savings Act. With the seating of a new (116th) Congress in January, this bill would need to be re-introduced to be further considered by Congress.

And on Feb. 6, 2019, both the House Ways & Means Committee and the Senate Special Committee on Aging held retirement-related hearings to consider retirement issues that may be addressed in this Congressional session. The early scheduling of hearings on retirement issues may indicate substantial interest in passing retirement legislation in 2019.

As Senators Portman and Cardin have a long history of working across the aisle to pass retirement legislation, it is anticipated that the Retirement Security and Savings Act of 2018 will be a key driver in retirement policy in the 116th Congress. Additionally, House Ways & Means Committee Chair Richard Neal (D-MA) is placing great emphasis on the U.S. retirement system as a priority under his leadership. Among many other provisions in proposed retirement legislation from the Senate and House, the following may be of interest to public sector plan sponsors:

Retirement Security and Savings Act of 2018

Age 60 Catch-Up Provision — Establishes a second catch-up provision of up to $10,000 annually (indexed) for 401(k), 403(b), and 457 plan participants starting at age 60. The current catch-up provision ($6,000 for 2019) would remain available to participants age 50 to 59.

Required Minimum Distributions (RMDs) — Increases the required beginning age for RMDs to 72 in 2023 and then to 75 in 2030. The excise tax penalty for missed RMDs would also be reduced from 50 percent to 25 percent. In addition, legislation from Portman and Cardin proposes eliminating RMDs for individuals with aggregate balances of less than $100,000. (Note: legislation introduced by Chairman Neal (D-MA) has a similar provision for aggregate accounts under $250,000).

403(b) Investment Expansion — Amends the Internal Revenue Code (Code) and the securities laws to permit 403(b) custodial accounts to invest in Collective Investment Trusts (CITs), which often have lower costs than registered mutual funds. This would provide participants in 403(b) plans equal access to CITs, which are now available to participants in public sector 401 and 457 plans.

Matching Plan Contributions Student Loan Repayments — Permits matching employer retirement plan contributions for student loan repayments as if those loan payments were a salary reduction contribution by the employee to the plan. This would permit employers to allow employees to accumulate retirement savings through the employer match at a time when student loan repayments can crowd out retirement plan contributions.

Retirement Plan Simplification and Enhancement Act of 2017

"First Day of the Prior Month" Rule for 457 Plan Contributions — Chairman Neal introduced legislation to address a legacy rule requiring employees to make contribution elections before the first day of the month in which compensation is paid. The legislation would remove this requirement, allowing participants who wish to make large contributions to their 457 plan (especially in December) to do so in order to maximize the annual contribution limit before the window of opportunity expires. A comparable provision was included in the Retirement Security and Savings Act.

The Receiving Electronic Statements to Improve Retiree Earnings (RETIRE) Act of 2017

Broadened Electronic Statement Distribution Modernizes distribution of statements and disclosures by allowing employers to make electronic distribution the default method for providing these documents. Participants receiving these documents electronically would receive an annual mailing informing them of their right to instruct the plan to receive delivery in hard copy.

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