2 retirement bills you should know about: 'SECURE 2.0' and 'Cardin-Portman' have strong bipartisan support

“SECURE 2.0″ is the nickname of some fairly significant retirement legislation that has been introduced. A recent TIAA webinar aimed to clarify what’s in this legislation working its way through the House of Representatives, as well as what is in tandem legislation wending through the Senate. TIAA’s Larry “Chad” Chadwick, SMD Government Relations; Christopher Spence, Managing Director, Federal Government Relations; David Swallow, Head of Consultant Relations, and Raoul Manchand, Director of Regulatory Engagement provided insights into the two pieces of retirement legislation.

SECURE 2.0: What it is, who proposed it

SECURE 2.0 is officially known as “Securing a Strong Retirement Act,” and was introduced by House of Representatives Ways and Means Committee Chairman Richard E. Neal (D-MA) and Ranking Member Kevin Brady (R-TX) in October 2020. In May 2021, after being reintroduced by the two men, it was unanimously passed by the Ways and Means Committee.

Even though it has broad bipartisan support, because of other legislation being worked on, it probably won’t proceed further along in the legislative process until fall 2021 or even into 2022, according to the TIAA webinar.

It focuses in on areas its big sister bill, the SECURE Act of 2019, didn’t flesh out, including preserving lifetime income, increasing access to retirement plans, increasing retirement saving, and simplifying retirement plan administration.

Retirement Security & Savings Act: What it is, who proposed it

Along with it, another piece of legislation has been proposed in the Senate: The Retirement Security & Savings Act, more simply known as “Cardin-Portman” after the two senators who sponsored it, Senator Rob Portman (R-OH) and Senator Ben Cardin (D-MD).

Cardin-Portman was introduced in the Senate Finance Committee, and that’s as far as it’s gotten, according to the TIAA webinar. There is some overlap in the two bills and should they pass, they would be consolidated.

Both Portman and Brady are retiring in 2022, so they will push very hard to get this done before they leave, the TIAA experts said.

Experts say: Think of the provisions as one piece of legislation

Most of the provisions aren’t very controversial, according to the TIAA experts. A lot of these provisions are simply adjusting regulations and removing barriers. Here are some key provisions:

INVESTMENTS

Collective investment trusts in 403(b) plans - Because of an “historical regulatory anomaly,” CITS weren’t allowed in 403(b) plans. Secure 2.0 would amend current regulations to make CITs an option for 403bs.

SAVINGS

Student loan payments – Permits employers to make matching contributions into retirement plans based on student loan payments.

Higher catch-up contributions – Increases the catchup limit to $10k for older individuals, “generally” starting at age 60. (Senate bill — you hit age 60, you can contribute in perpetuity; House bill — you get a 3-year window only).

Saver’s Credit – Directs IRS to promote, make refundable, a Saver’s Credit. It already exists but is underutilized and many taxpayers are not aware of it. (House bill helps Treasury make people aware of it; Senate bill says put the money into a retirement plan.)

PRESERVING INCOME

RMD age changes — Increases age for required minimum distributions to age 75; exempts small balances; reduces excise tax.

Updates RMD regulations that are outdated, such as annuitization barriers — these are things such as the minimum income threshold test; when individuals want to annuitize their money, they can’t because they fail this test. TIAA actuaries brought this to the attention of the industry several years ago as needing fixing. Also addresses RMD regulations that have a negative impact on partial annuitiziation.

INCREASING ACCESS, ENCOURAGING PARTICIPATION 

Multiple employer plans (MEPs) - Allows 403(b) plans to sponsor or participate in an open 403(b) MEP, including pooled employer plans (PEPs), and relieves 403(b)s from the “one bad apple” rule where one employer’s missteps would potentially bring down all the employers in a multiple employer retirement plan.

Financial incentives for particpaticpation — Employers could give incentives such as gift cards to encourage employees to participate in retirement plans.

Long-term part-time workers — Reduces service requirement for part-time workers to participate in retirement plans from 3 years to 2 years.

SIMPLIFYING PLAN ADMINISTRATION

Consolidation of notices - Agencies would review reporting and disclsoure requirements with an eye to consolidating or standardizing notices to participants.

Notices to unenrolled participants - Determine whether it is necessary to provide an unenrolled participant with a notification about something they’re not participating in.

Self-certifying hardships and unforeseeable emergencies - Permits plan admins to rely on an employee’s certification that a distribution meets a hardship requirement.

Retirement savings lost and found - Creates national retirement savings lost and found database. Would be adminstered by the PBGC. Instead of an employee having to call former employers, they could go to this database to search. For those amounts that are $1000 or less, if the employee can’t be found or they don’t cash check, the money would go to PBGC for employee.

OTHER

Other provisions include those related to reviewing missing participant regulations, in-plan Roth contributions, Roth rollovers; paper statement requirements; eligible distributions for domestic abuse victims.

Planning for enactment

Things for plan sponsors to think about as the legislation proceeds include determining what to communicate to plan participants, what provisions will be mandatory and what will be optional, and planning for potential operational impacts such as plan amendments that might need to be made and possible change in the numbers of plan notices that need to be sent.