WASHINGTON–The House has passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which would make it easier for small businesses to band together to offer 401(k) plans and eliminate the maximum contribution age on traditional individual retirement accounts, which is currently 70.5.
A provision that had been included in the bill that would have allowed money from tax-advantaged 529 education savings plans to be used for home-schooling expenses was removed.
Many lawmakers have gotten behind the bill as part of a broader effort at doing something about the lack of retirement savings by many Americans.
What Bill Would Do
The SECURE Act would:
- Make it easier for small businesses to band together to offer 401(k) plans
- Require businesses to let long-term, part-time workers become eligible for retirement benefits and repealing the maximum age for making contributions to traditional individual retirement accounts
- Make the age when required minimum distributions, or RMDs, from certain retirement accounts start to age 72, from 70.5, along with making changes to allow more annuities to be offered in 401(k) plans.
The legislation now heads to the Senate, where a similar bill, known as the Retirement Enhancement Savings Act, or RESA, has yet to be voted out of committee.
Sources of Funding
According to analysts, both bills also rely on funding their provisions by changing the rules governing inherited retirement accounts. The House measure would require most nonspouse beneficiaries to withdraw the money within 10 years of the original owner’s death, while the Senate bill would require distribution within five years for accounts worth at least $400,000, unless the beneficiary is the spouse, CNBC reported.
“We applaud the House for taking this important step to advance retirement security for Main Street Americans,” said Dale Brown, president and CEO of the Financial Services Institute. “Too many Americans have inadequate retirement savings, but the SECURE Act takes steps to address this crisis. It will help expand workplace retirement savings opportunities and allow individuals to save for retirement for as long as they are working. We urge the Senate to take up this critical legislation and pass it as soon as possible.”