A comprehensive, bipartisan retirement security bill to improve retirement security and help Americans’ build more tax-qualified savings was introduced today in the U.S. House of Representatives.
The Securing a Strong Retirement Act of 2020 would raise the age—to 75 from 72—when people have to begin taking required minimum distributions from their 401(k)s and individual retirement accounts.
The bill also would exempt individuals with account balances of $100,000 or less on the last day of the year from the RMD rule. The provision would apply to distributions required to be made in calendar years beginning more than 120 days after the date the bill is enacted.
The legislation also proposes the following:
• Promote retirement savings at an earlier age by enrolling employees automatically in their company’s 401(k) plan.
• Give individuals age 60 and older more flexibility to set aside additional savings by raising the catch-up contribution to $10,000 for those who participate in employer sponsored 401(k) and 403(b) plans, and adjust the threshold for inflation. Participants in SIMPLE plans could contribute an additional $5,000.
• Increase and modernize the existing federal tax credit for contributions to a retirement plan or IRA (the Saver’s Credit) The income limit for the 50% credit would be increased to $40,000 for single filers ($80,000 for joint filers and $60,000 for head of household). The amount of the contribution eligible for the 50% credit would be increased to $3,000.
• Allow individuals more flexibility to make gifts to charity through their IRAs.
• Allow employees to pay down a student loan instead of contributing to a 401(k) plan and still receive an employer match in their retirement plan.
• Create a new financial incentive for small businesses to offer retirement plans. The start-up tax credit would be increased to 100% of the costs, instead of 50%, for small employers with no more than 50 employees.