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Legislation Would Temporarily Raise DC Plan Contribution Limits

Legislation

A senior Republican member in the House has introduced legislation to help those whose retirement savings have been harmed by the economic impact of the COVID-19 pandemic. 

Rep. Patrick McHenry (NC), who serves as the ranking Republican on the House Financial Services Committee, introduced the Securing Additional Value for Every Retirement Saver (SAVERS) Act (H.R. 6562) to temporarily raise contribution limits for defined contribution plans, including 401(k), 403(b) and 457 plans, as well as IRAs. 

“Every American is feeling the economic impact of COVID-19,” McHenry stated in introducing the legislation. “We need to give savers the opportunity to shore up the savings they have worked so hard to grow. The SAVERS Act is a commonsense and temporary fix to put these everyday investors back on the right track toward their retirement goal, tax-free.”

In general, the maximum contribution limitations for 2020 would be tripled and, for savers limited by their annual income, the bill allows such savers to contribute up to 100% of their annual compensation from 2019 or 2020, whichever is higher. For example, the elective deferral limit for 401(k)s in 2020 is $19,500. As such, under the SAVERS Act, a plan participant would be able to contribute, in aggregate, up to the lesser of $58,500 or 100% of their compensation for either 2019 or 2020.   

The bill was referred to the House Ways and Means Committee and is cosponsored by five of McHenry’s Republican colleagues. 

The legislation also comes as House leaders turn their attention to a possible fifth stimulus bill, following the April 24 enactment of the $484 billion Paycheck Protection Program and Health Care Enhancement Act, which provided an additional $320 billion to restore funding for the Paycheck Protection Program (PPP). Discussions surrounding that potential bill are still in the beginning stages and likely won’t start to materialize until the first week in May.  

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