The Ways and Means Committee in the United States House of Representatives unanimously passed a bill aimed at increasing the flexibility of 401K savings accounts, and improving access to the accounts for both small businesses and the workers employed by them.
Described as potentially the, “most comprehensive changes to private retirement plans in more than a decade” by CNBC, the SECURE Act – an acronym for “Setting Every Community up for Retirement Enhancement” – received backing from both the top Democrat and the top Republican on the committee, an increasing rarity in the current climate of political hyperpolarization.
“Americans currently face a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty,” said committee Chairman Richard Neal (D-MA) in a statement on Tuesday. “The SECURE Act goes a long way in addressing this problem by making it easier for Americans to save,” he added, before characterizing the passage through the committee as, “a major bipartisan accomplishment.”
The consideration of reforming the structure of retirement savings has been considered for years by the legislative branch, according to a press release circulated by the Bipartisan Policy Center (BPC) in Washington, D.C.
“This latest legislation contains many overlapping provisions with the earlier Retirement Enhancement and Savings Act (RESA), a version of which was just reintroduced in the Senate,” the BPC release said. “Several of the provisions in both bills align with the recommendations of BPC’s Commission on Retirement Security and Personal Savings.”
The fact that the proposals featured in the bill have been the subject of steady bipartisan discussions for years increases the likelihood that the legislation will ultimately become law, CNBC says. “Elements of the bill have been debated among members for years and enjoy wide support among both industry groups and advocacy organizations,” wrote CNBC’s Ylan Mui.
Among the bill’s codified provisions, the primary goal of the proposed law is to ensure that small businesses provide private retirement benefits to their employees, while also allowing them to unite in order to offer 401K accounts. The bill would also establish a tax credit of up to $500 for firms that set up plans featuring automatic enrollment, simplifying the process for the employee. Businesses that have long-term workers on a part-time basis must also allow them to become eligible for retirement savings accounts.
The bill would also repeal the maximum age for Individual Retirement Account (IRA) contributions, while raising the age for required mandatory distributions from 70 and ½ to 72.
“With uncertainty surrounding the financial health of both Social Security and many pensions, 401(k)-type plans are being asked to play a larger and larger role in retirement security planning,” said Shai Akabas, BPC director of economic policy. “That is why it is so critical to ensure that we expand access to these accounts and continue to improve their efficiency and design.”
Find the details of the bill via the House Ways and Means Committee.