June 20, 2022
Senate Finance outlines retirement bill
The Senate Finance Committee is planning to mark up its Enhancing American Retirement Now (EARN) Act, intended to be incorporated into 'SECURE 2.0' retirement legislation, next week, possibly on June 22. Chairman Ron Wyden (D-OR) released a summary of the bill June 17, saying, "The Finance Committee has worked in a bipartisan way to make important improvements to the retirement system, building on our success in 2020. Our framework includes policies put forward by many members of our committee, and I appreciate the collaboration of Senators Crapo, Portman, and Cardin in crafting this package."
Like the bill passed by the House March 29, the EARN Act also includes provisions on 403(b) multiple employer plans, part-time workers, treating student loan payments as elective deferrals, and insurance-dedicated exchange-traded funds.
While the House bill would increase catch-up contributions to $10,000 ($5,000 for SIMPLE plans) between ages 62-64, the Senate Finance bill would permit participants to elect to contribute the additional amount between ages 60 and 63 (both the House and Senate provisions would be effective after 2023).
Both bills would also increase the age at which individuals must take required minimum distributions from 72 to 75 and include a provision to remove required minimum distribution barriers for life annuities.
The RISE & SHINE Act (S. 4353) approved by the Senate HELP Committee June 14 provides for emergency savings accounts linked to defined contribution plans. The EARN Act would provide an exception to the additional 10% tax that applies to early distributions from tax-preferred retirement accounts for certain distributions used for emergency expenses, which are unforeseeable or immediate financial needs relating to personal or family emergency expenses.
Just as the HELP bill would require plans to automatically re-enroll employees who decline to participate in the employer provided plan every three years, the EARN Act would provide a $500 credit if a small employer adopts a reenrollment feature under which employers would be required to reenroll employees at least every 3 years. The HELP bill additionally would improve communications to retirement plan participants and transparency around lump-sum buyout offers.
Similar to the House bill, EARN Act revenue offsets would: permit an employee participating in a SIMPLE IRA plan or SEP to elect to treat elective deferrals and employer contributions as after-tax Roth contributions; require catch-up contributions within an employer retirement plan to be made as after-tax Roth contributions; and permit an employee to elect to treat employer matching and other employer contributions as after-tax Roth contributions.
Bill text is not available. The Finance Committee marks up on a conceptual basis, so text is not available until after it completes consideration.
The EARN Act press release and section-by-section are available here.