The most powerful committee in the U.S. House of Representatives has advanced a powerful piece of retirement reform legislation – unanimously.
Signifying the importance of the issue, the first markup meeting of the House Ways & Means Committee for the 116th Congress on April 2 featured the approval of wide-ranging legislation to make it easier for businesses to offer retirement plans and for individuals to save for retirement.
In a markup session that featured few objections and much praise for bipartisan efforts, the committee favorably reported an amended version of the Setting Every Community Up for Retirement Enhancement Act of 2019 (H.R. 1994) – the SECURE Act – by a unanimous voice vote. The bill, as amended, will now move to the full House of Representatives for consideration.
“Unfortunately, Americans currently face a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty,” Ways & Means Committee Chairman Richie Neal (D-MA), said in his opening statement. “The SECURE Act goes a long way in addressing this problem by making it easier for Americans to save.”
ARA Offers Support
In an April 1 letter to Neal, Ranking Member Kevin Brady (R-TX) and Reps. Ron Kind (D-WI), Mike Kelly (R-PA) and Vern Buchanan (R-FL), the American Retirement Association offered its support of the legislation.
“On behalf of over 25,000 members of the American Retirement Association, we hereby express our strong support for the Setting Every Community up for Retirement Enhancement (SECURE) Act of 2019 and the inclusion of the Retirement Security for American Workers Act in the SECURE Act,” wrote ARA Executive Director and CEO Brian Graff. “We commend all of you for championing these important pieces of bipartisan legislation.”
Touting several provisions that will make it easier for small businesses to adopt and maintain a workplace-based retirement savings plan, Graff further emphasized: “All these provisions are sorely needed because small business owners face real challenges when deciding to provide retirement benefits for their workers and these new policies will help business owners make that critical decision with more certainty, clarity, and confidence.”
Open MEPs Reappear
The markup session included the addition of a substitute amendment by Neal regarding open multiple employer plans (MEPs) based on legislation introduced by Reps. Kind and Kelly. “This provision will make it easier for small businesses to offer retirement plans to their employees, and will result in the formation of an estimated 600,000 to 700,000 new retirement accounts,” Neal stated, commending Reps. Kind and Kelly for their leadership on the issue.
In general, the MEP proposal would allow two or more unrelated employers to join a pooled employer plan (PEP) with a designated pooled plan provider (PPP) that will have clear responsibility to ensure that the MEP follows the rules under ERISA and the tax code. It also provides relief from the one-bad-apple rule for covered MEPs, subject to the requirements described in the bill.
What’s in the SECURE Act?
Drawing from a number of bipartisan bills that were introduced last Congress, but never enacted, the estimated $16 billion SECURE Act, among other things, would:
- increase the auto enrollment safe harbor cap;
- simplify safe harbor 401(k) rules;
- increase the tax credit for small employer plan start-up costs;
- provide portability of lifetime income options;
- allow long-term part-time workers to participate in 401(k) plans;
- allow plans adopting by the filing due date to be treated as in effect as of close of year;
- provide a fiduciary safe harbor for selection of lifetime income provider;
- modify the treatment of custodial accounts on termination of section 403(b) plans;
- require disclosures regarding lifetime income; and
- modify the nondiscrimination rules to protect longer service participants.
For a deeper dive into the details of the bill:
- the Joint Tax Committee's description of the substitute amendment is available here;
- the legislative text of the SECURE Act is available here;
- a revenue table from the Joint Tax Committee is available here; and
- a section-by-section summary of the SECURE Act is available here (note that this summary does not include the MEPs provision or the provision modifying PBGC premiums for CSEC plans, which were both added by the substitute amendment).
Second Retirement Bill in the Works
Notably, Chairman Neal also announced that he and Ranking Member Brady will be working on a second, more comprehensive retirement bill with a goal of marking it up prior to the August recess. “While we are taking an important first step today, much more needs to be done. Over the coming months, the Ranking Member and I plan to put together another bill that will close the coverage gap, simplify the retirement system, and help Americans preserve their assets in retirement,” Neal stated.
Meanwhile, the bipartisan Retirement Enhancement and Savings Act (RESA) was reintroduced in the Senate on April 1 by Senate Finance Committee Chairman Charles Grassley (R-IA) and ranking member Ron Wyden (D-OR). The new Senate version of RESA tracks closely with the SECURE Act in the House, suggesting that the two chambers may be able to come to an agreement and send a retirement reform legislation to the President for his signature in the coming months.
Among other things, both bills authorize open MEP arrangements, significantly increase the incentives for a small business owner to adopt a new plan by enhancing the small employer pension plan start-up tax credit, and encourage small business owners to design a plan with an automatic enrollment feature.