Secure 2.0 Retirement Bill Passed House, on to Senate

[DrRoy]

Saw this story this morning. It's in the process, but not done yet.

https://www.yahoo.com/finance/news/...vote-on-capitol-hill-this-week-212156910.html

 

[braumeister]

How about a brief summary in your own words?

 

[Scuba]

I just read the linked article. Of the most interest to this group, the proposal includes a gradual increase in RMD age from 72 to 75. The article didn’t detail any specifics on this.

 

[Gumby]

I just read the linked article. Of the most interest to this group, the proposal includes a gradual increase in RMD age from 72 to 75. The article didn’t detail any specifics on this.

This one does https://tax.thomsonreuters.com/news/house-passes-secure-2-0-summary-of-key-tax-provisions/

Increase in required beginning date age
The Act would increase the required minimum distribution age to 73 starting on January 1, 2023 (for individuals who attain age 72 after December 31, 2022, and age 73 before January 1, 2030); to 74 starting on January 1, 2030 (for individuals who attain age 73 after December 31, 2029, and age 74 before January 1, 2033); and to 75 starting on January 1, 2033 (for individuals who attain age 74 after December 31, 2032).

The section would apply to distributions required to be made after December 31, 2022, with respect to individuals who attain age 72 after such date. (Bill section 106. Amending Code IRC 401(a)(9)(C))

So

- if you were born on or after January 1, 1959, your RMDs don't start until the year you turn 75.
- if you were born between January 1, 1957 and December 31, 1958, RMDs must begin the year you turn 74.
- if you were born between January 1, 1951 and December 31, 1956, RMDs must begin the year you turn 73.

 

[Exchme]

Trying to wade through the bill -
If you turn 74 after Dec 31, 2032, RMD would start at 75. If you're older than that, then:
If you turn 73 after Dec 31, 2029, RMD would start at 74. If you're older than that, then:
If you turn 72 after Dec 31 2022 RMD start at age 73

IRA catch up limit will be indexed by inflation to 2016. Age 62,63 & 64 get a $10,000 catch up limit, except for SIMPLE plans, which get $5,000.

Looks like an inflation adjustment using 2016 as the baseline for QCDs.

I'm sure we'll see more in the coming days as all politicians want to have passed out some goodies before an election. Here is the table of contents of the bill so folks can see if there are topics they need to read about further.

TITLE I—EXPANDING COVERAGE AND INCREASING RETIREMENT SAVINGS
Sec. 101. Expanding automatic enrollment in retirement plans.
Sec. 102. Modification of credit for small employer pension plan startup costs. Sec. 103. Promotion of Saver’s Credit.
Sec. 104. Enhancement of Saver’s Credit.
Sec. 105. Enhancement of 403(b) plans.
Sec. 106. Increase in age for required beginning date for mandatory distributions.
Sec. 107. Indexing IRA catch-up limit. Sec. 108. Higher catch-up limit to apply at age 62, 63, and 64.
Sec. 109. Pooled employer plans modification.
Sec. 110. Multiple employer 403(b) plans.
Sec. 111. Treatment of student loan payments as elective deferrals for purposes of matching contributions.
Sec. 112. Application of credit for small employer pension plan startup costs to employers which join an existing plan.
Sec. 113. Military spouse retirement plan eligibility credit for small employers. Sec. 114. Small immediate financial incentives for contributing to a plan.
Sec. 115. Safe harbor for corrections of employee elective deferral failures.
Sec. 116. Improving coverage for part-time workers.
Sec. 117. Deferral of tax for certain sales of employer stock to employee stock ownership plan sponsored by S corporation.
Sec. 118. Certain securities treated as publicly traded in case of employee stock ownership plans.
TITLE II—PRESERVATION OF INCOME
Sec. 201. Remove required minimum distribution barriers for life annuities. Sec. 202. Qualifying longevity annuity contracts.
Sec. 203. Insurance-dedicated exchange-traded funds.
TITLE III—SIMPLIFICATION AND CLARIFICATION OF RETIREMENT PLAN RULES
Sec 301. Recovery of retirement plan overpayments.
Sec 302. Reduction in excise tax on certain accumulations in qualified retirement plans.
Sec 303. Performance benchmarks for asset allocation funds.
Sec 304. Review and report to congress relating to reporting and disclosure requirements.
Sec. 305. Eliminating unnecessary plan requirements related to unenrolled participants.
Sec 306. Retirement savings lost and found.
Sec. 307. Updating dollar limit for mandatory distributions.
Sec. 308. Expansion of Employee Plans Compliance Resolution System. Sec. 309. Eliminate the ‘‘first day of the month’’ requirement for governmental section 457(b) plans.
Sec. 310. One-time election for qualified charitable distribution to split-interest entity; increase in qualified charitable distribution limitation.
Sec. 311. Distributions to firefighters.
Sec. 312. Exclusion of certain disability-related first responder retirement payments.
Sec. 313. Individual retirement plan statute of limitations for excise tax on excess contributions and certain accumulations.
Sec. 314. Requirement to provide paper statements in certain cases.
Sec. 315. Separate application of top heavy rules to defined contribution plans covering excludible employees.
Sec. 316. Repayment of qualified birth or adoption distribution limited to 3 years.
Sec. 317. Employer may rely on employee certifying that deemed hardship distribution conditions are met.
Sec. 318. Penalty-free withdrawals from retirement plans for individuals in case of domestic abuse.
Sec. 319. Reform of family attribution rules.
Sec. 320. Amendments to increase benefit accruals under plan for previous plan year allowed until employer tax return due date.
Sec. 321. Retroactive first year elective deferrals for sole proprietors.
Sec. 322. Limiting cessation of IRA treatment to portion of account involved in a prohibited transaction.
Sec. 323. Review of pension risk transfer interpretive bulletin.
TITLE IV—TECHNICAL AMENDMENTS
Sec. 401. Amendments relating to Setting Every Community Up for Retirement Enhancement Act of 2019.
TITLE V—ADMINISTRATIVE PROVISIONS Sec. 501. Provisions relating to plan amendments.
TITLE VI—REVENUE PROVISIONS
Sec. 601. Simple and SEP Roth IRAs.
Sec. 602. Hardship withdrawal rules for 403(b) plans.
Sec. 603. Elective deferrals generally limited to regular contribution limit.
Sec. 604. Optional treatment of employer matching contributions as Roth contributions.

 

[Exit 2024]

IRA catch up limit will be indexed by inflation to 2016

That part is confusing - I read text of the bill multiple times plus referenced articles and still can not figure out if that is 2016 or 2021 will be the baseline (average CPI for Sep-Aug). I personally tend to think that it will be year ended Aug 2021.

Age 62,63 & 64 get a $10,000 catch up limit, except for SIMPLE plans, which get $5,000.

Those amounts are also indexed by inflation with base being Q3 2021, text there is clear.

Both start in 2023.

https://www.congress.gov/bill/117th-congress/house-bill/2954/text
Those 2 are starting on page 20 in PDF.

 

[38Chevy454]

Since it passed so overwhelmingly in the House (414 to 5 vote), it is likely to pass in Senate as well.

For me the biggest effect is holding off RMD until I am 75. For those still working, the increased catchup savings is a good thing.

The bill also makes it easier for employers to auto-enroll employees into retirement accounts. I also think that is good, as incentive to have more people build up savings when they are not as financially astute to do it themselves.

 

[Which Roger]

Section 310: Maximum QCD increasing from $100K to $130K.
No mention of any change to the age for QCD eligibility (70 1/2). The last legislation that increased RMD age did not affect QCD age, and looks like that's still the case.

 

[jebmke]

Section 310: Maximum QCD increasing from $100K to $130K.
No mention of any change to the age for QCD eligibility (70 1/2). The last legislation that increased RMD age did not affect QCD age, and looks like that's still the case.

The financial case for QCDs prior to RMD are less compelling so probably not much pressure to do that.

I'll have to look at my data - I think my wife's IRA would have had her limited on QCDs at the $100K so this may help.

 

[rantk81]

Does anyone know if this latest iteration still includes imposing income limits on the ability to do Roth IRA conversions? (e.g. Backdoor Roth)? If so, is the bill trying to make it retroactive to 1/1/2022?

 

[Rianne]

Does anyone know if this latest iteration still includes imposing income limits on the ability to do Roth IRA conversions? (e.g. Backdoor Roth)? If so, is the bill trying to make it retroactive to 1/1/2022?

I think the income limit is wayyyy out of my league. Not so concerned about that one. But others might be.

 

[SecondCor521]

Does anyone know if this latest iteration still includes imposing income limits on the ability to do Roth IRA conversions? (e.g. Backdoor Roth)? If so, is the bill trying to make it retroactive to 1/1/2022?

AFAIK, that provision was in the Build Back Better Act, not the (various versions of) the SECURE 2.0 Act. Congress could mix and match if they chose to, but at this point I think they're two different things.

 

[SecondCor521]

I read a blog article about this bill. Of interest to me was the possibility of employer matching into Roth 401(k)s, which might help my kids.

 

[Exit 2024]

Does anyone know if this latest iteration still includes imposing income limits on the ability to do Roth IRA conversions? (e.g. Backdoor Roth)? If so, is the bill trying to make it retroactive to 1/1/2022?

As far as I can tell that is not in the bill, have been watching for that also as that is only option for us to get money into Roth accounts.

 

[Exit 2024]

I read a blog article about this bill. Of interest to me was the possibility of employer matching into Roth 401(k)s, which might help my kids.

Correct, section 604 at the end allows employers to match into Roth 401k but those matches will be included in Gross income for tax purposes.

Bill also allows employer to match student loan payments into 401k plan, I think that is a great addition for people with competing objectives and limited incomes.

 

[ncbill]

Correct, section 604 at the end allows employers to match into Roth 401k but those matches will be included in Gross income for tax purposes.

Bill also allows employer to match student loan payments into 401k plan, I think that is a great addition for people with competing objectives and limited incomes.

Will that include the federal government?

Even though their retirement contributions all go to Roth, the employer match goes into traditional (tax-deferred) in their TSP account, not Roth for my active-duty kid.

 

[oldtimer]

This one does https://tax.thomsonreuters.com/news/house-passes-secure-2-0-summary-of-key-tax-provisions/



So

- if you were born on or after January 1, 1959, your RMDs don't start until you turn 75.
- if you were born between January 1, 1957 and December 31, 1958, RMDs must begin at 74.
- if you were born between January 1, 1951 and December 31, 1956, RMDs must begin at 73.

Thank you for doing the date calculations for 1/4 billion Americans. Very easy now to quickly see when it applies based on one's birth date. The only thing I would adjust is "your RMDs don't start until [the year] you turn XX."

 

[Gumby]

That's a good change, and I will make it.