Congress is gearing up to change rules on retirement saving once again. At the beginning of 2020, we had the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Then in late March, we got the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We federal employees and retirees had barely figured out what changes were wrought in September of 2019 by the implementation of the Thrift Savings Plan Modernization Act (TSPMA) when these two new laws were enacted. Many of us are still confused!
But wait, there’s more! The Securing a Strong Retirement Act (SSRA) of 2020 has just emerged from the House Ways and Means Committee with broad bi-partisan support. Who knows? We may be seeing more changes to retirement rules before the first of the year. Or not.
There are a lot of proposals in SSRA, and it has yet to make its way through the legislative process, so this short article simply lists some of the proposals in which we will be most interested.
The age for taking your first required minimum distribution would be increased to age 75.
The IRA catch-up limit (for those who are 50 and older, or who turn 50 during the year) will be indexed for inflation year by year. Currently the limit is $1,000 and has been stuck at that amount since 2006. It began at $500 back in 2002.
Those age 60 and older would be allowed to make a larger catch-up contribution to retirement plans than those between 50 and 60. SSRA proposes that the catch-up contribution be raised from its current $6,500 up to $10,000 for those 60 or older (including, of course, those who turn 60 within the year).
Plans will be allowed to pay matching contributions on “qualified student loan payments” made by plan participants.
The penalty for failure to take a required minimum distribution would be lowered from 50% to 25%. If the missed RMD was from an IRA and it was corrected in a timely manner, the penalty would drop to 10%.
Individuals with less than $100,000 in retirement savings (including plans, IRAs, etc.) will be exempt from taking required minimum distributions regardless of their age.
Retirement plan distributions will be able to be used for charitable purposes, as is currently the case with IRA distributions.
The amount of the Saver’s Credit will be increased and the rules surrounding it will be simplified. Saver’s Credits are for low income individuals who are saving for retirement.
What isn’t in SSRA is how it will be paid for. Remember that the price tag of the SECURE Act was the demise of the “stretch IRA” for all but certain eligible designated beneficiaries.
We will see over the upcoming few months if SSRA does indeed get enacted and how it will look after it goes through the legislative process.