The SECURE Act, which was signed into law last December, included a provision that pushed up the age for mandatory retirement plan distributions from 70 to 72.
A provision in the bill would push distributions up even further, to age 75.
And don’t look for Congress to stop there. “My goal is to get rid of it completely,” House Ways and Means Ranking Member Kevin Brady (R., Texas) said of the age restriction during an appearance at the Bipartisan Policy Center Solutions Summit simulcast on Yahoo Finance.
He said the pending legislation, which he helped author, takes “another step forward in increasing that age to 75 and exempting those more modest accounts of $100,000 or less.”
What’s in the bill
Brady’s partner on the bill, the Democratic House Ways and Means Chairman Richard Neal (D., Mass.), has also voiced support for the provision. He noted in a recent Yahoo Finance Present interview that “people are living longer, they're going to work longer.”
The argument for an age restriction – which is noted in an official summary of the bill – is “to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries.”
The bill, as currently written, would change the rule for any required distributions in 2021 and beyond. The legislation would also exempt retirees from minimum distributions for the rest of their life if they have less than $100,000 in all of their retirement plans at age 75. (As it stands now, when you reach age 72, you're required to withdraw a certain amount of money from your retirement accounts each year and pay taxes on that amount.)
The coronavirus stimulus bill passed in March allowed retirees to skip their minimum distributions this year if they desired, but that provision expires at the end of 2020.
‘The two elements I'm really proud of’
Brady highlighted other provisions of his bill he said could change the landscape for savers. “Auto-enrollment we think is very important,” he said, noting that it will get people saving earlier and increase gradually the amount being saved over time.
The bill includes a new rule that pushes new employees who are starting at a company that offers a retirement plan to automatically enroll. Employees could opt out, but the default would be enrollment.
“We also expand and make larger the Saver's Credit, something that I have, frankly, been disappointed in the take-up of over the years,” Brady said.
The bill would simplify the SAVERS credit, which lets certain lower-income individuals get additional tax breaks when they save for retirement. This change would simplify the program and index the credit to inflation.
Debra Whitman, executive vice president and chief public policy officer at AARP, appeared on the panel with Rep. Brady and voiced her support for the bill and the changes to the credit.
“Right now, you have to file a certain tax form,” she said noting the complexities of claiming the saver’s credit that could be alleviated. It would help “people who don't have high returns because they don't pay a lot of income taxes.”
“We think this is an opportunity for really boots-on-the-ground help for workers beginning their savings,” Brady said.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.