Retirement Savings Plan Provisions on Capitol Hill

Among the many year-end bills that are circulating in the U.S. Senate and House of Representatives are a number that include fixes for Individual Retirement Accounts (IRAs) and 401(k)-type retirement savings plans. Some of the fixes are found in several bills; others are in just one of the bills. The bills are an alphabet soup of acronyms including RESA, the Retirement Enhancement and Savings Act of 2018; FSA, the Family Savings Act of 2018; EASA, the Encouraging Americans to Save Act and WPPA, the Women’s Pension Protection Act. Some of the fixes in the bills have been kicking around for a while; others are new.

Several proposals that may be of particular interest to plan participants and IRA account owners are provisions that would:

• Require 401(k)-type plans to provide an estimate of how much lifetime monthly income an account balance would produce if it were paid as an annuity beginning at retirement age.

• Eliminate the age restriction on contributions to IRA accounts. Currently individuals aged 70 ½ or older cannot make contributions to their IRAs.

• Increase the contribution limits for the Saver’s Credit and make the credit refundable. It would also be possible to claim the credit by filing an E-Z tax return instead of the long 1040 Form. 

• Eliminate the required minimum distribution at age 70 ½ for accounts of $50,000 or less.  All accounts of an individual must be included to determine whether they meet the $50,000 threshold.

• Permit the transfer of lifetime income options in a 401(k) or other individual account plan to another plan or to an IRA if the option is no longer available in the original plan.

• Improve retirement plan coverage for long-term, part-time workers by permitting workers who complete 500 hours of service or more in a year to join a 401(k) plan after two consecutive years of employment and to make contributions to the plan.

Several of the bills include measures to enable unrelated small employers to join together to form a 401(k) plan. These provisions for “open multiple employer plans” would shift responsibility for running the plan away from employers to a financial institution or other entity.

Congress may leave town without passing a retirement bill or passing a bill that includes only a few of these provisions. However, since most of these provisions are in more than one bill, the chances are good that they will reappear in the next Congress. Stay tuned!