On March 29, 2022, the House passed a bill that now heads to the Senate for consideration and possible amendment. It is known as SECURE 2.0. Previous retirement legislation known as the SECURE ACT was passed in late 2019. These are legislative attempts to encourage and support increased retirement savings for the American workforce.
RMD Increasing age
As reported by Paychex.com, the bill would raise the required minimum distribution (RMD) age from 72 to 75 – with a gradual option until 2033 to reach the upper age limit – allowing older workers to save for longer. The age was 70 and a half until the first SECURE ACT was adopted.
Increased “catch-up” amounts
The bill proposes new “catch-up” contribution amounts: For people age 50 and older, the amount would increase from $6,500 to $10,000 for a government-sponsored 401(k) and 403(b). employer. It provides an additional $5,000 for SIMPLE packages (starting at $3,000). These would be indexed to inflation.
Student loan debt
To settle student loan debt, instead of contributing to a 401(k) or another type of retirement plan, employees can choose to make contributions that go toward paying off their student loans. These contributions would still be eligible for employer matching.
Participation in the part-time worker scheme
Part-time workers would be eligible for an employer-sponsored pension plan, which was previously only available to full-time employees.
Paychex also reported that a new automatic pension plan enrollment provision is designed to make it easier for employees to participate. Small businesses with 401(k) and 403(b) plans would automatically enroll employees.
Employees who prefer not to participate can opt out. The initial enrollment amount is 3% of salary with a gradual increase of 1% per year until the 10% limit is reached. There is an exception for small businesses with 10 or fewer employees, new businesses less than 3 years old, churches, and government agencies. Businesses could integrate automatic payroll enrollment.
As of this writing, it is unclear which, if any, of these and other House provisions will survive Senate deliberations and action toward final legislation. https://www.paychex.com/articles/compliance/secure-act-changes