Paving the way for a year-end deal with the House of Representatives, one of the most powerful committees in the U.S. Senate has advanced comprehensive retirement reform legislation that has the support of the American Retirement Association.
Serving as the foundation for the Senate’s counterpart to the House-passed SECURE Act 2.0, the Senate Finance Committee voted 28-0 to favorably report an amended version of the Enhancing American Retirement Now (EARN) Act, which includes more than 70 proposals aimed at helping more Americans save.
The markup session featured few objections and much praise for bipartisan efforts, including that this will likely be the final effort by the bipartisan duo of Sens. Rob Portman (R-OH), who is retiring, and Ben Cardin (D-MD), who previously worked on retirement security legislation in the House with Portman. Both are now members of the Senate Finance Committee.
The EARN Act is now cleared for consideration by the full Senate, where it will be merged with the RISE & SHINE Act, which was approved June 14 by the Senate Health, Education, Labor and Pensions (HELP) Committee.
Senators from both parties noted that they hope the full Senate will approve the legislation quickly and they can begin working with the House on merging the differences between the bills in order to approve the legislation before Congress adjourns for the year.
For our initial description of the EARN Act, including specific provisions that the ARA has championed, along with a comparison of some of the differences between the EARN Act and the House’s SECURE 2.0, click here.
During consideration of the legislation, Senate Finance Committee Chairman Ron Wyden (D-OR) touted several provisions contained in the EARN Act, including changes that would convert the Saver’s tax credit into a match, such that the credit will be deposited directly into a worker’s 401(k) or IRA rather than issued as a tax refund. “This will unlock even greater savings potential with added interest and earnings on that deposit,” he stated.
Wyden also highlighted the provision to treat student loan payments as elective deferrals for purposes of matching contributions. “Millions of Americans have loads of student loan debt they typically pay off every month. By the time they pay for food, rent, utilities, the car, and those student loan payments, many people don’t have anything left over to participate in their employer’s retirement plan. The EARN Act says they will no longer have to forego that opportunity to save,” Wyden explained.
Amendments Adopted
Overall, only a handful of changes were made to the original draft released June 17 by Wyden and ranking Republican Mike Crapo (R-ID). Modifications include:
- changing the effective date for the higher catch-up limit to apply at age 60, 61, 62 and 63 to be effective for tax years beginning after Dec. 31, 2024, instead of after 2023;
- accelerating the effective date for the optional treatment of employer matching and nonelective contributions as Roth contributions to apply to contributions made after Dec. 31, 2022, instead of after 2023;
- adding a provision to assist savers in recovering unclaimed savings bonds; and
- adding a provision to modify the age requirement for qualified ABLE programs.
The committee also adopted (23-5) an amendment offered by Sens. Steve Daines (R-MT), Debbie Stabenow (D-MI) and Charles Grassley (R-IA) to accelerate the effective date of the exclusion of changes to certain disability-related first responder payments to tax years after date of enactment. This provision was offset by changes to the rules applicable to charitable conservation easements.
Beyond those changes, Wyden agreed to work with Sen. Sheldon Whitehouse (D-RI) on including a provision to require 401(k) and 403(b) plans to automatically enroll participants in plans upon becoming eligible. Whitehouse had expressed disappointment that the auto-enrollment expansion provision was not included in the Senate bill. It was, however, included in the House-passed SECURE 2.0.
It’s important to note that the legislation is subject to further change as it moves through the legislative process.
The bill text for the EARN Act is not yet available. However, a description of the additions to the chairman’s mark is online here, and a revised Joint Tax Committee revenue estimate of the legislation is here. (For links to a summary of the EARN Act as introduced and a tax impact analysis of the legislation, see our June 20 post).
