Earlier this week, the House of Representatives passed a budget bill, HR 1158, and a related bill, HR 1865, to enact the "Setting Every Community Up for Retirement Enhancement Act," referred to as the “SECURE Act.” The SECURE Act makes a number of changes affecting retirement plans. The Senate is expected to pass the bills by December 20 to avoid a government shutdown, and President Trump has agreed to sign both bills.
The SECURE Act was previously passed by the House of Representatives last summer, but it was delayed in the Senate due to a hold placed by a few senators. The SECURE Act’s provisions include the following:
- simplify the safe harbor 401(k) plan rules;
- increase the automatic enrollment safe harbor cap to 15% of a participant’s eligible compensation;
- allow employers to join a pooled arrangement that permits otherwise unrelated employers to collectively offer a multiple employer plan (MEP) to their employees;
- repeal the prohibition on contributions to a traditional IRA by an individual who has reached age 70½;
- increase the age for taking required minimum distributions from both tax-qualified plans and IRA’s from 70½ to 72;
- eliminate the so-called “stretch IRA” by requiring all non-spouse beneficiaries to take benefits over a period no longer than 10 years;
- provide for portability of lifetime income options that would allow participants to preserve their lifetime income investments and avoid surrender charges and fees;
- simplify the process for offering annuity benefit options in 401(k) and 403(b) plans;
- provide nondiscrimination testing relief for closed defined benefit plans to allow for benefit increases to older, longer-serving participants;
- provide an automatic enrollment credit of $500 for certain small employers; and
- increase the start-up credit for small employer retirement plans (generally to 15% from 10%).
In addition, the budget bill would repeal the 2.3% excise tax on medical devices, the tax on high-end employer health plans known as the “Cadillac tax,” and the annual fee on health insurance providers.