Legislation
Setting Every Community Up for Retirement Enhancement (SECURE) Act (H.R. 1865, Division O) – President Trump signed the most significant piece of retirement plan legislation in more than a decade into law on December 20, 2019. The SECURE Act, or Division O of the Further Consolidated Appropriations Act (Public Law No. 116-94), contains nearly 30 provisions that will have a direct impact on workplace-based retirement plans, and many of those provisions are effective January 1, 2020. The SECURE Act is designed to expand access to workplace-based retirement plans, allow individuals to save more, and encourage individuals to translate those savings into an income stream for life. The American Retirement Association strongly advocated for its enactment and we sincerely thank this Congress and its bipartisan leaders for championing retirement security.
Multiemployer Pensions – In November 2019, Senators Chuck Grassley (R-IA) and Lamar Alexander (R-TN), chairmen of the Senate Finance and Senate Health, Education, Labor and Pensions Committees respectively, released a comprehensive multiemployer pension recapitalization and reform plan. The plan proposes significant changes to the management and operation of all multiemployer pension plans, provides relief to multiemployer plans in critical and declining funding status by allowing the partition of orphaned participants, and creates a new Pension Benefit Guaranty Corporation (PBGC) premium structure for multiemployer plans with an increase in the insurance guarantee for participants.
Rehabilitation for Multiemployer Pensions Act of 2019 (H.R. 397) & Butch Lewis Act of 2019 (S. 2254) – The legislation creates a new agency in the Treasury Department to issue bond-backed loans to multiemployer pension plans in critical and declining funding status. Lead Sponsors – H.R. 397: Rep. Richard Neal (D-MA, 1st); Rep. Peter King (R-NY, 2nd); Rep. Bobby Scott (D-VA, 3rd); Rep. Don Young (R-AK, At Large) & 206 additional cosponsors. S. 2254: Sen. Sherrod Brown (D-OH) & 29 additional cosponsors
Retirement Security and Savings Act of 2019 (S. 1431) – The bill includes more than 50 provisions designed to strengthen Americans’ retirement security. Lead Sponsors – Sen. Rob Portman (R-OH); Sen. Ben Cardin (D-MD)
Women’s Retirement Protection Act (H.R. 2005/S.975) – The bill expands the spousal protections currently in place for participants and beneficiaries of defined benefit plans to defined contribution plans, reduces the minimum participation standards for long-term part-time workers who have completed 500 hours of service for two consecutive years and creates two grants programs to improve financial literacy for women and to support women with obtaining qualified domestic relations orders. Lead Sponsors – H.R. 2005: Rep. Lauren Underwood (D-IL, 14th); Rep. Janice Schakowsky (D-IL, 9th); Rep. Donald Norcross (D-NJ, 1st); Rep. Suzanne Bonamici (D-OR, 1st). S. 975 – Sen. Patty Murray (D-WA) & 22 additional cosponsors.
Retirement Parity for Student Loans Act (S. 1428) – The bill would permit 401(k), 403(b), SIMPLE and governmental 457(b) retirement plans to make matching contributions to workers as if their student loan payments were salary reduction contributions. Lead Sponsors –
Automatic IRA Act of 2019 (S. 2370) – The bill requires employers in operation for two or more years and with 10 or more employees to enroll their workers in IRAs through an automatic payroll deduction program. Lead Sponsor – Sen. Sheldon Whitehouse (D-RI)
Pension and Budget Integrity Act of 2019 (H.R. 4035) – The bill prohibits the use of premiums paid to the Pension Benefit Guaranty Corporation (PBGC) from single-employer defined benefit pension plans from being counted in the House or Senate as a revenue offset for other federal spending. Lead Sponsors – Rep. Derek Kilmer (D-WA, 6th); Rep. George Holding (R-NC, 2nd); Rep. Anthony Gonzalez (R-OH, 16th) & 5 additional cosponsors.
Higher Education Loan Repayment and Enhanced Retirement (HELPER) Act of 2019 (S. 2962) – The bill allows an individual to withdraw up to $5,250 per year from a 401(k), 403(b), and 457 plans for qualified higher education expenses. Lead Sponsor – Sen. Rand Paul (R-KY); Cosponsors – Sen. Thom Tillis (R-NC); Sen. John Kennedy (R-LA)
Retirement Plan Modernization Act (H.R. 5676) – The bill increases the automatic IRA rollover limit from $5,000 to $8,000 and indexes the limit to inflation. Lead Sponsors – Rep. Gregorio Kilili Camacho Sablan (D-MP, At-Large); Rep. Tim Walberg (R-MI, 7th)
Senior Housing IRA Act of 2020 (H.R. 5726) – The bill would not tax the capital gains of the sale of a principle residence if the proceeds of the sale were deposited into a Roth IRA account. Lead Sponsors – Rep. Josh Gottheimer (D-NJ, 5th); Rep. John Katko (R-NY, 24th)
Investing in Your Family’s Future Act (H.R. 5837) – The bill would permit treatment of child care payments as elective deferrals for purposes of employer matching contributions. Lead Sponsors – Rep. Ann Wagner (R-MO, 2nd); Rep. Hakeem Jeffries (D-NY, 8th)
Regulations
New Electronic Disclosure Rule Proposed – In October 2019, the Department of Labor announced a proposed rule to allow retirement plan disclosures to be posted online. The proposal creates a new, voluntary safe harbor for employers who want to make retirement plan disclosures available on a website, rather than sending volumes of paper documents through the mail. The Department estimates that the elimination of printing and mailing costs will save $2.4 billion for these ERISA-covered plans over the next ten years.
SECURE Act Implementation – In January 2020, the Internal Revenue Service issued Notice 2020-6 that provides certain IRA reporting relief to financial institutions on reporting required minimum distributions (RMDs) for 2020. Section 114 of the SECURE Act changed the required beginning date for RMDs from age 70 ½ to age 72. If an IRA owner has an RMD due for 2020, the financial institution must furnish an RMD statement to the IRA owner by January 31, 2020 that informs the IRA owner of the date by which the RMD must be distributed. But due to the SECURE Act, the RMD statement should now not be sent to IRA owners who will attain age 70 ½ in 2020. However, if a statement was already provided, the IRS will not consider such a statement to have been provided incorrectly only if the financial institution sends a corrected notice that no RMD is required for 2020 no later than April 15, 2020.
SECURE Act Request for Guidance – In February 2020, the American Retirement Association wrote to both the Department of Labor and Treasury to request guidance on certain issues related to the SECURE Act that should be prioritized by the Departments, including issues relating to pooled employer plans, the new long-term part-time employee eligibility rules, and the new required lifetime income disclosure rules.
Updated Life Expectancy and Distribution Period Tables for Required Minimum Distributions Proposed – In November 2019, the Department of Treasury and the Internal Revenue Service proposed updated life expectancy and distribution period tables that are used to calculate required minimum distributions (RMDs) from retirement plans and IRAs. These updated tables reflect longer life expectancies. The American Retirement Association supports this change, which should result in greater retirement benefit security for participants, as less money would be required to be distributed from retirement accounts each year than under the 2002 final regulations.
Research
Fidelity Investments Retirement Savings Trends – Plan design enhancements combined with positive savings behaviors and strong market conditions have helped push average 401(k) balances to record levels. Among the highlights in Fidelity Investments’ fourth quarter 2019 analysis of retirement savings trends is that the average 401(k) balance rose to $112,300, a new record high and a 7% increase from the previous quarter’s balance of $105,200. The year-over-year average balance increased 17% from $95,600 in the fourth quarter of 2018. The average 403(b)/tax exempt account balance increased to $93,100, up 6% from last quarter and an increase of 18% from the previous year. The number of 401(k) millionaires also reached another milestone, increasing to a record 233,000 people, up from 200,000 in the third quarter and 21,000 at the end of 2009.
Empower Institute Retirement Survey – Retirement is no longer about reaching a certain age but is more of a mindset, and American workers close to retirement are eagerly looking forward to the next chapter in their lives, according to the survey results from the Empower Institute. In a new white paper, Rethink, Rewire, Retire, Empower reports that:
- 83% of pre-retirees said they expect to “live their best life” in retirement;
- 83% said they would rather save more today so they don’t have to cut back in retirement; and
- 81% said there are more job and career opportunities for people post-retirement.
Pre-retirees are also looking forward to describing themselves as explorers, travelers and volunteers, with 44% saying their top advice to their younger self would be to save enough to have fun, as well as for necessities. More than 60% of pre-retirees also report that they plan to continue to work or join the gig economy, citing freelancing and consulting as their top choice for work.
Investment Company Institute Saving Survey – In a new study by the Investment Company Institute, 56% of DC plan participants agree that they probably wouldn’t save for retirement if they didn’t have a plan at work. ICI’s “American Views on Defined Contribution Plan Saving, 2019” study found that agreement was the highest (70%) among individuals with household incomes between $30,000 and $49,999. The level fell only slightly to 63% for those with incomes less than $30,000 and 60% for those with incomes between $50,000 and $99,999.
