The House of Representatives on Tuesday passed the Securing a Strong Retirement Act of 2022 (SSRA of 2022) with overwhelming bipartisan support, 414-5.
The bill includes provisions to relax the restriction on annuities in pension plans in a section titled Income Preservation. It would change the minimum distribution rules required to allow annuity options and also increase the limits for qualified longevity annuity (QLAC) contracts.
Also the bill:
• Increases the age to start the required minimum distributions. Plan participants are required to begin receiving distributions from their pension plans at age 72. The bill would raise it to 73 this year and 74 on January 1, 2029 and 75 in 2032.
• Expands automatic enrollment in employer-sponsored pension plans, while reducing service requirements for part-time employees to participate in an employer-sponsored plan. It requires 401(k) and 403(b) plans to automatically enroll participants, with an opt-out option for employees. The initial auto-enrollment amount is at least 3% but no more than 10%, but the amount would be increased by one percentage point every year until the total reaches 10%. It also allows employers to treat student loan payments made by their employees as voluntary deferrals for purposes of determining pension matching contributions.
• Increases the level of catch-up contribution to retirement accounts for those close to retirement. Under current law, the IRA contribution limit is increased by $1,000 for people over age 50, but the bill would index those limits beginning in 2023. It would also increase the Catch-up contribution limits for employees. The catch-up contribution limit for 2021 is $6,500, except for SIMPLE plans, where the limit is $3,000. The bill would increase those caps to $10,000 and $5,000 to apply at ages 62, 63 and 64.
• Reduced administrative burdens for plan sponsors by modifying pension plan design rules and changing regulations on joint employer plans and multi-employer 403(b) plans. Small businesses with 10 or fewer employees, new businesses (those in operation for less than three years), church plans, and government plans are excluded from automatic membership requirements.
• Expands “rothification” by requiring a qualified plan under section 401(a), a plan under section 403(b), or a government plan under section 457(b) to allow a eligible participant to make catch-up contributions to address these after-tax contributions from Roth, according to a Deloitte report. The bill would also allow plan participants to designate employer matching contributions as Roth contributions, and would allow SEPs and SIMPLE IRAs to be designated as Roth IRAs.
Insurance industry advocates such as the Insured Retirement Institute have been pushing for changes since the SECURE Act in 2019. The bill was one of the main issues during the virtual legislative tour of the ‘IRI at the beginning of the month.
“The bipartisan legislation will provide measurable benefits to American workers and retirees who worry about whether they will have enough retirement income through their golden years,” said Wayne Chopus, President and CEO. from IRI. “Our efforts will now shift to the Senate to build on this positive momentum and get a bill to President Biden this year.”
Some consumer advocates argue that the legislation do little to help those on the lower rungs of the income ladder. In an article earlier this month, Mother Jones called the provisions “paltry” in the article, “Congress is about to make the rich richer – again.”
But financial services organizations were unanimous in their praise of the legislation:
Thasunda Brown Duckett, President and CEO of TIAA: “This proposal is particularly significant because it builds on the SECURE Act, which has taken significant steps to expand access to lifetime income and increase life security. retirement for all Americans.”
Marc Cadin, CEO of Finseca: “The number one question our members hear from many of the clients they serve is: ‘Am I ready for retirement? Today, Congress took a key step by offering additional tools to help more Americans be prepared.”