Two significant proposals before Congress right now are part of the recently proposed SECURE Act and RESA bill.
The most significant changes involve efforts to get small businesses to offer workplace retirement savings plans and changes to IRA rules, particularly changes to required minimum distributions.
Elizabeth Kelly, former special assistant to the president on the National Economic Council during the Obama administration and now SVP of operations at United Income, says that both the Senate Finance Committee’s Retirement Enhancement and Savings Act (RESA) and the House Ways and Means Committee’ Setting Every Community Up for Retirement Enhancement, or SECURE, Act would enable older Americans who remain in the workforce to continue making tax-deferred contributions to traditional IRAs after age 70.5.
While only 14.09% of people age 71-80 report still being in the workforce, the bill will have a beneficial impact on those who do choose (or are forced to) continue working. Kelly points out that both bills would also increase revenue by mandating that inheritors of 401(k) plan and IRA balances (excepting spouses or minor children) withdraw the entire balance within 10 years of the account owner’s death.
The SECURE Act has passed the House Ways and Means Committee and will be headed to the House floor soon. The RESA bill was just introduced, but no committee activity has been scheduled yet. Senator Chuck Grassley of Iowa said that the RESA bill is ‘paid for’ with the main offsetting provision involving the current option for an owner to pass along an IRA or 401(k) to a family member or other beneficiary. Under the existing law the recipient can keep the inherited sum in a tax deferred account and save for their own retirement if they take a required distribution every year. This is referred to as a stretch IRA.
The bill keeps the savings option for those who inherit a retirement account, but limits how much can be inherited on a tax-protected basis. This encourages new generations to save for retirement.
For more information, please read:
What to Know About the 2 Big Retirement Bills in Congress | ThinkAdvisor