A number of bills are moving rapidly through the House and the Senate that would (if passed and signed) enhance the retirement plans of many Americans. While these bills continue to morph, below is a general description of provisions as of early April 2019.
Retirement Security & Savings Act
Senators Rob Portman (R-Ohio) and Ben Cardin (D-Maryland) introduced the Retirement Security & Savings Act in December 2018 and have reintroduced it in 2019. The Act is considered to be as sweeping as prior legislation, specifically the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and Pension Protection Act (PPA) of 2006. Proposals that would impact governmental plans include:
- Eliminate the 457(b) “first day of the month” rule
- Permit 457(b) plans to allow in-service distributions at age 59½ rather than 70½
- Eliminate the Required Minimum Distributions (RMD) from Roth 457(b)
- Allow rollovers from Roth IRAs to Roth 457 plans
- Allowing non-spousal beneficiaries to roll assets into their employer-based plans
- Updating the mortality tables used when calculating RMD at age 70½
- Exempting small accounts (less than $100,000) from the RMD calculation
- Creating an additional catch-up option for participants over age 60
- Simplifying auto-enrollment participant notices
- Allowing employer matching to retirement plans for student loan payments
Retirement Enhancement and Savings Act
Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) introduced the Retirement Enhancement and Savings Act (RESA) in February. While RESA is primarily aimed at private sector plans, it does include a provision that would allow more time for terminating participants to repay outstanding plan loans.
The Setting Every Community Up for Retirement Enhancement Act of 2019 sponsored by Richard Neal (D-MA) and Kevin Brady (R-TX) has passed unanimously out of the House Ways and Means Committee as of early April and will go to the full House. This bill includes the core provisions of RESA making smaller employers able to join multiple employer plans and includes a safe harbor for selecting lifetime income providers in defined contribution plans. The latest provision of Lifetime Income Disclosure Act (LIDA) has been challenged by plan sponsors as being inflexible. More on both RESA and Secure Act as they move through the House and Senate, but they appear to be supported by both parties and will likely go to Conference Committee and head to the White House.
NAGDCA Legislative Priorities
Each spring, the NAGDCA Executive Board visits congressional representatives in Washington DC to advocate for governmental retirement savings plans and participants. In addition to some of the above proposals, the Board is advocating for:
- Eliminating the “First Day of the Month” rule for 457(b) plans
- Allowing participants to roll Roth IRAs into their plan accounts
- Exempting Roth contributions from the RMD calculation
- Preserving important unique plan features, including allowing both pre-tax and Roth options; maintaining the 10% early withdrawal penalty exclusion in 457(b) plans; and maintaining both traditional and over-50 catch-up provisions.
Please consult with your advisor for more information on the status of pension proposals and how they may affect your plan.