The House of Representatives approved legislation Sept. 27 that seeks to make it easier for businesses to offer retirement plans and for individuals to save for retirement. The Family Savings Act (H.R. 6757) now moves to the Senate, which may take up similar legislation in a lame duck session following the congressional midterm elections.
If enacted, H.R. 6757 would:
- ease the commonality rules for multiple employer plans (MEPs) and eliminate the so-called “one bad apple” rule;
- create a new Universal Savings Account (USA);
- improve the rules relating to election of safe harbor 401(k) status by eliminating the notice requirement for non-elective contributions, and give small business owners the flexibility to switch to plans with non-elective contributions;
- permit plan participants to roll over their lifetime income investment to another retirement savings vehicle if the plan sponsor decides to discontinue that investment option in the plan;
- allow employers to adopt a qualified plan up to due date of tax return; and
- provide nondiscrimination testing relief to certain employers with closed defined benefit plans, provided they give new employees a comparable benefit in a DC plan.
The bill includes an amendment introduced Sept. 25 that would create a fiduciary safe harbor with respect to the selection of an insurer for a guaranteed retirement annuity contract in a DC plan. The amendment also expands designated beneficiaries under Section 529 qualified tuition accounts to unborn children, and deletes a provision requiring the PBGC to conduct a study of the agency’s single-employer pension insurance modeling system.
Many of the provisions in H.R. 6757 were drawn from the Retirement Enhancement and Savings Act (RESA), which was first introduced in 2016 by Senate Finance Committee Chairman Orrin Hatch (R-UT) and ranking committee member Ron Wyden (D-OR). Hatch announced at the beginning of the year that he plans to retire at the end of this term and it was believed that enactment of RESA would cap off his service on Capitol Hill.
Other Tax Reform 2.0 Measures
In addition to H.R. 6757, the House also approved the American Innovation Act (H.R. 6756) to spur innovation by helping new businesses with startup costs and capital expenditures. The chamber is expected to approve the third of three tax reform bills, the Protecting Family and Small Business Tax Cuts Act (H.R. 6760), which would make permanent the individual and small business tax cuts from the Tax Cuts and Jobs Act currently set to expire in 2025.
