Before he retires at the end of 2022, Rep. Kevin Brady (R., Texas) has prioritized getting another round of retirement reform through Congress.
The GOP's ranking member on the House Ways and Means Committee was central to passage of the SECURE Act in 2019, and alongside Democratic Chairman Richard Neal (D., Mass.) has pushed a bill – dubbed “Secure Act 2.0” – through his committee last week.
It still has many miles to go before it reaches President Biden – including consideration in the Senate. But in an interview with Yahoo Finance this week, Brady sounded optimistic things were on track.
“If Congress will take a pause from the partisan activities and work together, I think this Retirement 2.0 will get to the president's desk, hopefully this year,” he said in a wide-ranging conversation that also touched on Biden’s tax plan.
Brady said his bill is “really focused on those workers who in the past haven't saved,” especially those who face hurdles from either working for a small business, not making a lot of income, or simply not being in the habit of saving. “We're tackling that with new incentives” Brady said.
And this week, a much more limited bill was introduced in the Senate. The Improving Access to Retirement Savings Act came from Sens. Chuck Grassley (R., Iowa), Maggie Hassan (D., N.H.) and James Lankford (R., Okla.). The bill features some similar measures the Neal/Brady legislation, called the Securing a Strong Retirement Act of 2021, like increasing participation in multiple employer plans and new incentives for small businesses, but is not as far reaching.
Both proposals have gained the backing of various retirement groups with lawmakers now tasked with ironing out what provisions everyone can agree on and how it can actually pass the two chambers.
In 2019, the SECURE Act represented the first major retirement legislation since 2006. Here are a few ways the second-round bill may change the way Americans save for retirement.
Required minimum disbursements
A key provision in the House legislation raises the age people must start taking mandatory distributions in private retirement plans (401(k) plans and IRAs). The SECURE Act increased the required minimum distribution age to 72, from 70. The new bill raises it to 75.
This is key because “people are living longer,” Brady said, adding that allowing people to continue to grow their nest egg for a few extra years “we think makes good economic sense too.”
In the past, Brady has discussed going even further: “My goal is to get rid of it completely,” he said of the age restriction in a recent appearance at the Bipartisan Policy Center Solutions Summit streamed on Yahoo
His bill also exempts 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 last March allowed retirees to skip their minimum distributions that year if they desired.
Another significant measure would push employers to automatically enroll new employees in the company’s retirement plan, if one is offered. Employees could opt out, but the default would be enrollment.
"It's an embarrassment that we don't have that yet," Christian Weller, a professor at the University of Massachusetts, told Yahoo Finance recently about automatic enrollment. (Studies have shown that employers with auto-enrollment retirement plans have higher rates of participation.)
At a recent hearing, Neal touted the provision, saying it would help move toward his overall goal of “enrollment for all.”
The bill would also allow employers to help their workers pay back student loans while saving for retirement. The idea is to allow individuals to pay down student debt instead of contributing to a 401(k) plan, but at the same time get an employer match in their retirement plan.
One-third of private-sector workers currently don’t have access to a retirement plan at work, so this legislation wouldn't necessarily impact them.
The Senate plan is less ambitious, focused instead on a grace period for employers to correct errors in administering automatic enrollment.
Other provisions in the House bill include changes to the SAVERS credit, which lets certain lower-income workers get additional tax breaks when they save for retirement. This change would simplify the program and index the credit to inflation.
The bill also provides a "clearinghouse" for employees to find lost retirement accounts through a national database. Recent studies have found that money in tens of thousands of retirement plans go unclaimed when workers move from company to company and lose track. The bill would also help workers who move from state to state who participated in different state-level plans, and let workers over 50 catch up on contributions.
Both Secure act 2.0 and the Senate bill offer moderate changes to the private retirement system without addressing the more challenging issue of Social Security, which could run low on funds as early as 2031.
Another contentious retirement issue is multi-employer pensions. The American Rescue Plan passed earlier this year included $86 billion to help shore up some of those troubled retirement plans.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.