Savers can wait longer to begin emptying retirement accounts under pending legislation.
The Senate Finance Committee advanced a bill on Wednesday that would raise the age for required minimum distributions from retirement accounts to 75, alongside other provisions designed to strengthen Americans’ retirement security.
The Enhancing American Retirement Now (EARN) Act is half of the Senate’s version of SECURE Act 2.0, the retirement legislation that the House of Representatives passed in March. The other half, called the RISE & SHINE Act, moved out of the Senate Health, Education, Labor, and Pensions Committee earlier this month. Part of lawmakers’ job is now to reconcile these versions and agree on a final version of what would become the second major retirement bill in less than three years, a successor to the SECURE Act of late 2019.
The legislation is unlikely to progress to a vote before the full Senate, since there are relatively few legislative days remaining in the year for the chamber’s already packed agenda, said Paul Richman, chief government and political affairs officer at the Insured Retirement Institute. Instead, the most likely path for passage is for House and Senate committee members to work together behind the scenes to craft a bill that would be attached to another piece of legislation that must pass by the end of the year, like a spending bill.
“Now, we have a framework of what could go into the final bill,” Richman said. While passage is not guaranteed, the legislation’s strong bipartisan support gives it a greater likelihood of success, he noted.
Lawmakers next need to agree on the details. For example, the EARN Act would raise the age for required minimum distributions to 75, from the current 72, effective after 2031, while the House version calls for a more phased approach that would raise the age to 75 by 2033.
Here are other key provisions included in the EARN Act:
Permitting employers to provide matching contributions to 401(k) and other tax-preferred retirement plans for employees’ student loan payments as if those payments were retirement contributions, effective after 2023.
Requiring catch-up contributions to an employer retirement plan for savers ages 50-plus to be made as after-tax Roth contributions, effective after 2023.
Allowing participants between the ages of 60 and 63 to contribute an additional $10,000 in catch-up contributions to 401(k) plans, indexed for inflation, effective after 2024.
Requiring an employer with a 401(k) plan to permit part-time employees with at least 500 hours of service in two consecutive years to participate in the plan, effective after 2022 (down from three consecutive years as outlined in the Secure Act).
“There’s nothing in there that’s earth-changing, but there are these small changes that can have an incrementally beneficial effect,” said Michael Kreps, co-chair of the retirement services group at Groom Law Group. “It seems like good government to me.”
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