By Pension and Benefits Editorial Staff
The House Ways and Means Committee on April 2, 2019 approved bipartisan retirement savings and IRS reform bills that are likely to become law this year, the House’s top tax writer has said. The following two measures, now headed to the House floor, cleared the committee by voice vote: Setting Every Community Up for Retirement Enhancement (SECURE) [Bill] of 2019 (H.R. 1994), and Taxpayer First [Bill] of 2019 (H.R. 1957).
House Ways and Means Committee Chairman Richard Neal (D-MA) told reporters after the April 2 markup that the chances of H.R. 1994 and H.R. 1957 becoming law this year are “excellent.” To that end, Neal added that he and Senate Finance Committee (SFC) Chairman Chuck Grassley (R-IA) are “on the same page.” Notably, Grassley and SFC ranking member Ron Wyden (D-OR) introduced a similar retirement savings bill, Sen. 972, on April 1, as well as a companion Taxpayer First Bill.
Retirement enhancement and savings. “The SECURE [Bill] goes a long way in addressing this problem by making it easier for Americans to save,” Neal said in an April 2 statement. “Passage of this bill is a tremendous bipartisan accomplishment, and I hope to see the measure move through Congress and be signed into law in short order,” he added.
Key provisions of the bill include the repeal of the maximum age for IRA contributions, penalty-free withdrawals from retirement plans for childbirth and adoptions, and expanded Code Sec. 529 plans. Additionally, the measure would increase the credit limitation for small employer pension plan start-up costs and would allow “long-term” part-term workers to participate in Code Sec. 401(k) plans.
IRS reform. House Ways and Means Committee ranking member Kevin Brady (R-TX) noted how important it is to reform the IRS alongside implementation of Republicans’ tax code overhaul in 2017.
“With a new tax code, it is time for a new tax administrator,” Brady said during opening statements at the April 2 markup. “These reforms will transform the IRS into an agency with a singular mission: quality, taxpayer service,” he added.
H.R. 1957 would implement some of the following IRS reforms, among others:
- Establish an independent office of appeals within the IRS;
- Require the IRS to submit to Congress plans to redesign the structure of the agency to improve efficiency, modernize technology systems, enhance cyber security and better meet taxpayer needs;
- Help protect taxpayers from tax ID theft and improve taxpayer interaction with the IRS should they become a victim of this crime;
- Establish new safeguards to protect taxpayers against recent IRS enforcement of so-called “structuring laws”; and
- Modify the private debt collection program to ensure lower-income Americans are not targeted, while also strengthening the long-term viability of the program.
Senate Finance Committee leaders introduce enhanced retirement savings bill. On April 1, 2019, Senate Finance Committee (SFC) leaders introduced bipartisan legislation to encourage employers to adopt new retirement plans and reduce the cost of operating retirement plans for their employees. The Retirement Enhancement and Savings Act of 2019, S. 972, updated from the earlier version, would include new provisions to encourage workers to plan and save for retirement.
Retirement Enhancement and Savings Act. The proposal, according to its sponsors, Chuck Grassley (R-IA) and Ron Wyden (D-OR), would reform retirement savings laws by:
- Improving on multiple employer plans by expanding them to make it easier for small employers to join together to sponsor a single retirement plan for their workers. This is expected to help millions of Americans save for retirement and streamline the plan-administration costs for small businesses.
- Creating a new fiduciary “safe harbor” for employers that offer, as part of a defined contribution plan, an option for employees to invest in lifetime-income arrangements, such as annuities.
- Enhancing the ability of employees to transfer their retirement plan assets to a new retirement plan when they change jobs.
- Encouraging employees to increase their retirement savings annually through automatic increases in contributions to 401(k) plans and requiring employers to provide estimates of how much an employee’s account would provide during retirement if it were invested in an annuity.
- Permitting employees to pass a limited portion of an IRA or 401(k) account to a family member or other beneficiary to permit the beneficiary to continue the tax-deferred saving for retirement.
Ongoing bipartisan effort. Bipartisan work on the Retirement Enhancement and Savings Act of 2019 began in 2006, its sponsors noted. The Senate Finance Committee has held multiple hearings to discuss the retirement system over several Congresses and reviewed numerous proposals to improve the system, including ideas that came out of the Finance Committee’s Tax Reform Working Group on Savings and Investment in 2015.
The Retirement Enhancement and Savings Act of 2019 is the result of the “best ideas” from those hearings and proposals. It was unanimously approved by the Finance Committee in 2016.
A little more history. The Finance Committee unanimously reported legislation as S. 3471 in November 2016 (114th Congress), according to a bill summary. Senators Orrin Hatch (R-UT) and Wyden reintroduced the bill in the 115th Congress with technical modifications (S. 2526).
As introduced in this Congress by Sens. Grassley and Wyden, the proposed legislation makes additional technical modifications, the most significant of which are updating the effective dates, modification of the exception to the required minimum distribution rules in Section 501, and deleting Section 505 of S. 2526) which provided for an acceleration of Pension Benefits Guaranty Corporation premiums.
“Planning for retirement is important, yet challenging. The Retirement and Savings Act would help Americans get on the path of saving for a secure retirement during their working years while making sure their savings will last throughout their retirement. It also would make it easier and more cost-effective for small employers to sponsor a retirement plan for their employees,” Grassley said.
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