Securing a Strong Retirement Act Re-Introduced

House Ways and Means Committee Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) have introduced the Securing a Strong Retirement Act (SSRA) of 2021, legislation that was first introduced in October 2020. It builds upon the Setting Every Community Up for Retirement Enhancement Act (SECURE) Act of 2019. The House Ways and Means Committee held a markup hearing Wednesday, May 5, and unanimously voted to advance this legislation to the full House of Representatives to vote on the measure.

This legislation is the first comprehensive bipartisan retirement legislation introduced in 2021. SSRA of 2021 expands upon and includes additional provisions from the SSRA of 2020. While this bill (and others) have been coined by many as “SECURE 2.0,” it is prudent to follow retirement legislation developments by bill name for clarity and think of “SECURE 2.0” in the context of retirement reform generally. 

The new and amended provisions include the following changes from the 2020 proposal.

• Requires automatic enrollment of eligible employees in 401(k) and 403(b) plans with certain exceptions and grandfathering provisions, but eliminates the same requirement for SIMPLE IRA plans that appeared in the 2020 proposal
• Increases the required minimum distribution (RMD) age to 73 on January 1, 2022; to age 74 on January 1, 2029; and to age 75 on January 1, 2032. The SECURE Act previously increased the age from 70½ to 72.
• Drops the provision aligning ESOP rules of S Corporations with those of C Corporations that appeared in the 2020 proposal, but adds a placeholder that it is a Congressional goal to preserve and foster employee ownership of S Corporations through ESOPs
• Provides an additional, indexed higher tier of catch-up deferral contributions for those who are age 62, 63, and 64
• Permits 403(b) plans to participate in multiple employer plan (MEP) arrangements, specifically including pooled employer plans (PEPs)
• Reduces from three years to two years the period of service requirement for long-term, part-time workers, and disregards pre-2021 service for vesting purposes
• Directs the Departments of Labor (DOL) and Treasury to issue regulations explaining what fiduciaries need to do to meet their fiduciary duty in searching for missing participants
• Eliminates the provision permitting tax-free qualified charitable contributions to be made from employer-sponsored retirement plans that appeared in the 2020 proposal
• Permits employers to perform top-heavy tests separately for defined contribution plans covering excludable employees
• Limits repayment of qualified birth or adoption distributions to three years
• Permits participants to self-certify that deemed hardship distribution conditions are met in certain circumstances
• Permits participants who self-certify that they have experienced domestic abuse to withdraw the lesser of $10,000 or 50 percent of their account without being subject to the 10 percent early distribution penalty tax. The funds could be repaid to the plan over three years.
• Makes changes to stock attribution rules under family attribution for coverage and nondiscrimination testing
• Permits discretionary amendments that increase benefits to participants to be adopted by the due date of the employer’s tax return
• Permits new 401(k) plans established after the end of the taxable year but before the employer’s tax filing date that are treated as having been established on the last day of the taxable year to receive elective deferrals up to the due date of the employee’s tax return for the initial year when they are sponsored by sole proprietors and single-member LLCs
• Limits only the portion of an IRA used in a prohibited transaction to be treated as distributed, as opposed to current rules disqualifying and treating the entire IRA as distributed
• Permits SIMPLE IRAs to accept Roth contributions, and, plan permitting, allows employees to treat employee and employer SEP contributions as Roth contributions
• Matches hardship rules for 403(b) plans to the 401(k) plan rules
• Requires catch-up contributions to be made on a Roth basis beginning January 1, 2022
• Permits defined contribution plans to provide participants with the option of receiving match contributions on a Roth basis
• Plan amendments pursuant to this legislation must generally be made by the end of the 2023 plan year (2025 for governmental plans); plan amendment dates under the SECURE Act, CARES Act, and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 are revised to conform with the same new dates

This legislation carries forward the following provisions from the 2020 proposal.

• Further enhances the small retirement plan start-up credit, with a maximum credit of 100% (vs. the current 50%) for employers with no more than 50 employees
• Requires the IRS to promote the saver’s credit
• Permits 403(b) plans to invest in collective investment trusts
• Provides for indexing of IRA catch-up contributions
• Permits certain student loan repayments to qualify for employer retirement plan matching contributions
• Allows a small employer joining a MEP or PEP arrangement to potentially claim a small plan start-up credit during the first three years of the MEP/PEP arrangement’s existence
• Provides a new small employer tax credit for enhanced plan eligibility for military spouses
• Permits immediate de minimis financial incentives, in addition to a matching contribution, to individuals for contributing to a retirement plan
• Enhances options for correcting employee salary deferral errors
• Increases the qualifying longevity annuity contract RMD exemption
• Permits increasing payments in IRA and defined contribution plan life annuity benefits
• Allows retirement plan fiduciaries additional discretion in whether to seek recoupment of accidental overpayments
• Reduces excise tax on certain failures to take RMDs
• Changes disclosure rules for performance benchmarks for asset allocation funds
• Directs Treasury, DOL, and the Pension Benefit Guaranty Corporation (PBGC) to review and report on reporting and disclosure requirements and makes recommendations to Congress to consolidate, simplify, standardized, and improve such requirements
• Simplifies retirement plan disclosures to non-participating employees
• Creates a national online “lost and found” database to connect individuals with unclaimed retirement account benefits
• Expands the IRS retirement plan correction program to permit self-correction of certain inadvertent IRA errors
• Eliminates “first day of the month” deferral election requirement for governmental 457(b) plans
• Requires defined contribution plans to provide paper benefit statements at least once annually, unless a participant elects otherwise
• Makes certain technical corrections to SECURE Act provisions