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House passes SECURE Act

Proposes changes to retirement plans

Posted May 29, 2019

On May 23, the House of Representatives passed H.R. 1994, the Setting Every Community Up for Retirement Enhancement (SECURE) Act by a vote of 417 to 3. The measure contains proposals authored by members from both sides of the aisle, but one point of dispute was that the it does not allow employees to use 529 plans to pay for K-12 schooling.

The bill is designed to close loopholes and make it easier for small business employees, home care workers, and long-term part-time workers to save for retirement. The measure now goes to the Senate, which has its eye on S 972, the Retirement Enhancement and Savings Act (RESA).

The SECURE Act bill modifies the requirements for employer-provided retirement plans, individual retirement accounts (IRAs), and other tax-favored savings accounts.

With respect to employer-provided retirement plans, the bill modifies requirements regarding the following:

  • Multiple employer plans, making them more flexible for employers to band together;
  • Automatic enrollment and nonelective contributions, allowing safe harbor plans to increase the cap;
  • Tax credits for small employers that establish certain plans, including plan startup costs;
  • Loans, limiting them for small purchases;
  • Lifetime income options;
  • Converting custodial accounts upon termination of section 403(b) plans into IRAs;
  • Retirement income accounts for church-controlled organizations;
  • Relaxing the eligibility rules for certain long-term, part-time employees;
  • Delaying required minimum distributions;
  • Revising the nondiscrimination rules to allow tenured employees to continue accruing benefits;
  • Minimum funding standards for community newspaper plans; and
  • Pension Benefit Guaranty Corporation premiums for CSEC plans (multiple employer plans maintained by certain charities or cooperatives).

The bill also includes provisions that

  • Treat taxable non-tuition fellowship and stipend payments as compensation for the purpose of an IRA,
  • Repeal the maximum age for traditional IRA contributions,
  • Treat difficulty of care payments as compensation for determining contribution limits for retirement accounts,
  • Allow penalty-free withdrawals from retirement plans if a child is born or adopted,
  • Expand the purposes for which qualified tuition programs (commonly known as 529 plans) may be used,
  • Reinstate and increase the tax exclusion for certain benefits provided to volunteer firefighters and emergency medical responders,
  • Increase penalties for failing to file tax returns, and
  • Require the Internal Revenue Service to share tax information with U.S. Customs Border Protection to administer the heavy vehicle use tax.

With bipartisan support, and Congress’ desire to make it easier for people to save for retirement, the measure (or one such measure) may have the thrust to becoming law.

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