House Committee Unanimously Approves SECURE Act
On April, 2019, the US House of Representatives’ Ways and Means Committee unanimously approved the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”). While the Benefits Compliance team doesn’t normally report on bills that haven’t yet passed, we chose to provide this information as the SECURE Act, if passed, would result in major changes to retirement regulations. Additionally, the unanimous vote from the Ways and Means Committee reflects bipartisan support for the Act, which means that there are good chances that some version of it will be signed in to law.
As background, the SECURE Act comes after multiple bills attempted to include similar provisions. Specifically, the Retirement Enhancement and Savings Act (RESA) was approved by the Senate Finance Committee and the Family Savings Act was passed by the House in 2018, respectively. The SECURE Act includes provisions found in both of those bills and adds some new provisions.
The SECURE Act is broken up into four titles, and some of the major provisions are summarized as such:
Title I: Expanding and Preserving Retirement Savings
- Increases auto enrollment safe harbor cap to 15 percent
- Simplifies 401(k) safe harbor, notably eliminating the notice requirement
- Increases tax credit for small employer plan start ups
- Provides credit for small employers that start plans that include automatic enrollment
- Prohibits plan loan distribution through credit cards
- Allows portability of lifetime income investments for defined contribution, 403(b), and governmental plans
- Requires employers to offer 401(k) plan participation to long-term part-time workers
- Provides penalty-free withdrawals for qualified births and adoptions
- Increases the age for required minimum distributions from age 70 1/2 to age 72
Title II: Administrative Improvements
- Permits plans adopted by the employer’s tax return due date to be treated as in effect as of the close of the plan year
- Requires annual benefit statements to include a lifetime income disclosure
- Provides safe harbor for fiduciaries that select lifetime income provider
Title III: Other Benefits
- Expands Section 529 plans to cover additional educational costs, notably include student loan repayment
Title IV: Revenue Provisions
- Modifies required minimum distribution rules relating to death of the account owner
- Increases penalties for failure to file a Form 5500
As noted, this legislation would result in an overhaul of many of the retirement regulations that have been in place for decades. If passed, it will likely require employers to amend their plans and adjust their plan operations. We will continue to monitor any developments.