The House approves 'Secure Act 2.0,' impacting retirement savings.

A bill to enhance the retirement savings system for U.S. workers has been passed by the House of Representatives, bringing it nearer to becoming law.

The Secure Act 2.0, or the Securing a Strong Retirement Act, H.R. 2954, was passed by a bipartisan vote of 414-5 on Tuesday. The legislation will now move to the Senate for further consideration.

The House Ways and Means Committee Chairman Richard Neal, D-Mass., stated that H.R. 2954 will aid Americans in saving for a secure retirement by increasing coverage, simplifying the retirement system, and safeguarding retirement accounts. He emphasized that many workers reach retirement age without sufficient savings.

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The bill, which was approved by the House Ways and Means Committee in a unanimous, bipartisan voice vote in 2021, is a follow-up to the first Secure Act, which was passed in 2019.

Lisa Featherngill, Comerica Bank's national director of wealth planning, stated that the plan has provisions that are advantageous for individuals saving for retirement and beneficial for younger savers.

Highlights of the bill

The Second Secure Act contains several provisions that would be advantageous to retirement savers and employers.

Employers would be required to automatically enroll eligible workers in 401(k) plans at a rate of 3% of salary, which would increase annually until the employee is contributing 10% of their pay. Employees could opt out or select a different contribution amount. Businesses with 10 or fewer employees or are less than 3 years old would be exempt from the mandate.

The plan proposes modifications to the contribution limits for savers nearing retirement and the withdrawal requirements for retirees. Specifically, individuals aged 62, 63, and 64 would be allowed to make catch-up contributions of $10,000, an increase from the current limit of $6,500.

The minimum age requirement for required minimum distributions will increase to 73 in 2022, 74 in 2029, and 75 by 2032, from the current 72.

Employers would be able to match student loan payments as contributions to retirement, providing a retirement boost for student loan borrowers through legislation.

Featherngill stated that if someone has substantial student loans and cannot contribute much to their 401(k), they would still be able to receive an employer match on the amount paid towards their student loans.

Featherngill suggested that young workers could benefit from being able to choose whether an employer match should be applied to a Roth 401(k), which would offer a tax advantage during retirement.

The legislation would provide tax credits for survivors of domestic abuse, small business owners, and low-wage workers, and establish a national database for Americans to recover lost retirement accounts.

What’s next

The Senate will now consider the legislation, which has already passed the House, in April.

Other bills in Congress may also make improvements to retirement saving, similar to the Secure Act.

In February, the House Education and Labor Committee made changes to the RISE Act, H.R. 5891, which deals with retirement savings plans in addition to education.

Two bills in the Senate focus on retirement savings: the Retirement Security and Savings Act, S. 1770, and the Improving Access to Retirement Savings Act, S. 1703.

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