Bipartisan retirement security bill headed for House floor vote

The House could vote as early as the week of March 28 on bipartisan retirement security legislation aimed at making it easier for businesses to offer tax-qualified retirement savings plans to their employees and for individuals to participate in retirement plans and grow their tax-preferred savings, according to multiple press reports this week citing comments from lawmakers and House staff members. (Majority Leader Steny Hoyer, D-Md., had not released an official House floor schedule for the coming week as of press time.)

Highlights of key provisions

The Securing a Strong Retirement Act of 2021 (H.R. 2954), which was introduced last year by Ways and Means Committee Chairman Richard Neal, D-Mass., and ranking member Kevin Brady, R-Texas, and was approved unanimously at a committee mark-up last May, would build on bipartisan retirement security legislation (the SECURE Act) that was signed into law at the end of 2019. (The SECURE Act was incorporated into the Further Consolidated Appropriations Act, 2020 (P.L. 116-94). For additional details on that legislation, see Tax News & Views, Vol. 20, No. 42, Dec. 19, 2019.)

Retirement security enhancements: At a high level, the retirement security provisions in the Ways and Means-approved bill would, among other things:

• Allow plan participants nearing retirement to contribute more to their retirement accounts—by increasing the limits on catch-up contributions for certain employees, for example—and allow plan participants of any age to take advantage of the benefits of tax-deferred earnings over a longer period of time by raising the age for taking mandatory minimum distributions;
• Expand the universe of workers that participate in employer-sponsored retirement plans—for example, by requiring employers offering certain types of retirement plans to automatically enroll their employees in those plans (though employees could opt out), allowing employers to treat student loan payments made by their employees as elective deferrals for purposes of determining retirement plan matching contributions, and reducing the service requirements for part-time employees to participate in an employer plan;
• Modify certain retirement plan design rules to ease administration burdens for plan sponsors—particularly small businesses—and provide additional flexibility and other relief for plan participants;
• Remove barriers to offering certain types of annuity products within a defined contribution plan; and
• Make certain technical amendments to 2019’s SECURE Act.

Expanded ‘Rothification’: These and other proposed retirement plan enhancements and savings incentives would reduce federal receipts by nearly $27.25 billion over 10 years, according to an estimate by the nonpartisan Joint Committee on Taxation (JCT) staff. But that amount would be more than offset by nearly $27.4 billion through provisions that would expand “Roth” treatment of certain retirement accounts and certain retirement account contributions. (“Roth”-style retirement accounts, named for former Senate Finance Committee Chairman William Roth, R-Del., require contributions to be made with after-tax funds rather than on a pre-tax basis, with distributions paid out tax-free during retirement.)

Among the specific offsets in the legislation are proposals to:

• Require a section 401(a) qualified plan, section 403(b) plan, or governmental section 457(b) plan that permits an eligible participant to make catch-up contributions to treat those contributions as after-tax Roth contributions;
• Allow participants in a section 401(a) qualified plan, a section 403(b) plan, or a governmental 457(b) plan to designate employer matching contributions as Roth contributions; and
• Permit SEPs and SIMPLE IRAs to be designated as Roth IRAs, subject to an employee election.

Find out more: For additional details on the Ways and Means-approved bill, see Tax News & Views, Vol. 22, No. 24, May 7, 2021. A description of the provisions in legislation is available from the JCT staff.

Senate prospects

Assuming the bill clears the House—an outcome that is generally expected given its bipartisan pedigree—it is likely to get a favorable reception in the Senate, where lawmakers on both sides of the aisle have expressed support for expanding the SECURE Act. It’s worth noting, though, that Senate taxwriters have retirement security proposals of their own that they likely will want to incorporate into any new legislation that Congress eventually sends to the White House.

Thus far in the 117th Congress, Finance Committee Chairman Ron Wyden, D-Ore., has released the Encouraging Americans to Save Act (S. 2452); taxwriters Ben Cardin, D-Md., and Rob Portman, R-Ohio, have reintroduced their Retirement Security and Savings Act (S. 1770); and taxwriters Charles Grassley, R-Iowa, Maggie Hassan, D-N.H., and James Lankford, R-Okla., have introduced their Improving Access to Retirement Savings Act (S. 1703).

Wyden has not yet announced plans for a Finance Committee mark-up of a retirement security bill.

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