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Bipartisan retirement tax bill advances

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Tax Hot Topics newsletter The House Ways and Means Committee approved a bipartisan package of retirement plan tax provisions by voice vote on May 5. The committee action tees up the legislation for potential enactment when an opportunity to attach it to another legislative vehicle arises.

The Securing a Strong Retirement Act of 2021 (H.R. 2954) builds off changes made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act enacted in 2019. It would create and enhance incentives designed to expand plan coverage and encourage more saving. Major provisions in the bill include:

  • Requiring all Section 401(k) and 403(b) plans to provide for auto-enrollment with some exceptions for existing, governmental, church and start up plans
  • Allowing employees to designate employer matching contributions as Roth contributions
  • Permitting employers to make matching 401(k), 403(b) or SIMPLE IRA contributions for “qualified student loan payments” made by an employee
  • Allowing Simplified Employee Pension Plan and SIMPLE IRAs to be designated as Roth accounts
  • Allowing 403(b) plans to participate in MEPs under SECURE Act rules, including granting relief from the “one bad apple” rule
  • Increasing the three-year credit for small business pension plan startup costs to 100% for employers with up to 50 employees, and extending it through five years
  • Increasing the age for required mandatory distributions from retirement plans from 72 to 75
  • Indexing the $1,000 Individual Retirement Account catch-up contribution limit for individuals 50 years or older to inflation beginning in 2022, and increasing the limit at ages 62, 63 and 64
  • Making several technical changes meant to encourage annuities

The bill enjoys strong bipartisan support, but no House vote is scheduled. It seems unlikely to move on its own, and is more likely to be attached to another moving tax bill. The provisions may continue to evolve before potential enactment.

Contact:
Dustin Stamper
Managing Director
Washington National Tax Office
T +1 202 861 4144

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