A new retirement bill known as the SECURE Act 2.0 is making its way through Congress. It aims to build on the SECURE Act of 2019 by giving Americans more incentives to save for retirement and proposes changes to required minimum distribution rules to allow individuals to keep their money in retirement accounts longer.

The SECURE Act of 2019 changed the rules around how an individual can save and withdraw money from retirement accounts. It was the first major legislative change to retirement tax laws in more than a decade. Now, new legislation under consideration includes extending required minimum distributions (RMDs) to later ages and increasing catch-up contribution amounts.

As a reminder, the original SECURE Act passed in 2019 included the following:

• Raised the age of required minimum distributions from 70 ½ to 72.
• Removed the ability to “stretch out” distributions from an inherited IRA over a lifetime for non-spouse beneficiaries.
• Allows 529 college savings plans distributions to pay back student loans.
• Penalty-free withdrawals of up to $5,000 from workplace savings plans to help offset the costs of having or adopting a baby.

The following provisions have been proposed and are under consideration, but none have yet been enacted into law under the SECURE Act 2.0:

• Delays RMDs until age 73 in 2022. Distribution requirements would shift to age 74 in 2029 and 75 in 2032, but there are variations of this timeline in other proposals.
• Raises the annual “catch-up” contribution amount to $10,000 for 401(k), 403(b) and 457(b) plans and to $5,000 for SIMPLE IRA or SIMPLE 401(k) plans. The exact age for the higher catch-up amount is under negotiation.
• Employers would be allowed to make matching retirement plan contributions to Roth 401(k) plans.
• Employers would be required to automatically enroll employees in 401(k) and 403(b) plans. Automatic deferrals would start at 3% to 6% of compensation.
• Employers would be allowed to make contributions to retirement plans for employees who are repaying student loans and not participating in a retirement savings plan.

The SECURE Act 2.0 was passed by the House of Representatives in March with a 414 to 5 vote. A separate bill called the EARN Act was introduced in the Senate in September. Both bills would make significant changes to RMDs, but there are differences in the two bills’ RMD provisions. The odds of passing a major retirement bill before the end of the year look promising, but nothing is expected to get done until after the midterm elections in November.

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