There are signs that 2019 could see meaningful retirement legislation. First, several bills were introduced in 2018 that had common retirement-related elements. Second, the convening of the 116th Congress in January 2019 will see new Chairmen heading the House Ways and Means Committee, and the Senate Finance Committee. Finally, Senators Rob Portman (R-OH) and Ben Cardin (D-MD), long associated with retirement plan issues, introduced the Retirement Security and Savings Act (the “Bill”) on December 19, 2018. The Bill is the Senators’ most comprehensive attempt at retirement reform since their efforts led to the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Pension Protection Act of 2006.
Although the Bill was introduced during the final days of the 115th Congress, Union Bank & Trust expects the Senators to reintroduce the Bill in 2019. Union Bank notes the following provisions that either have broad bipartisan support or are ideas that will improve retirement plan laws:
- Start-Up Tax Credits — The Bill contains a variety of enhanced tax credits designed to motivate small employers to establish retirement plans. For example, the plan start-up tax credit would increase from $500 to $5,000.
- Tax Credits Linked with Automatic Re-Enrollment — The Bill would provide for a three-year $500 tax credit per year for a small employer (i.e., 100 or fewer employees) to establish a re-enrollment feature within an eligible automatic contribution arrangement.
- Required Minimum Distribution-Related Changes — The Bill would revise RMD-related rules to include: (a) exempting retirement account balances of $100,000 from the RMD rules; (b) increasing the RMD age, in stages, from 70-1/2 to 75 for IRAs and qualified plans; (c) allow workers older than 70-1/2 to contribute to IRAs; and (d) modernize the life expectancy tables that determine RMD amounts.
- Student Loan Relief — The Bill would treat certain student loan payments as qualifying for employer matching contributions. In other words, an employer could make a matching contribution to a 401(k) plan on behalf of employees who make student loan payments rather than elective deferrals to the plan.
- Participant Notice Requirements — The Bill would address participant disclosure rules to include: (a) studying the current disclosure requirements; (b) consolidating required disclosures; and (c) simplifying disclosures. As a side note, Union Bank expects a different bipartisan bill to be introduced in 2019, providing for electronic delivery as the default method for providing participant disclosures.
- Charitable Distributions — The Bill would exempt from taxation, within limits, charitable distributions made from employer-sponsored plans similar to the non-taxable treatment of charitable distributions made from IRAs.
Union Bank & Trust’s Retirement Plan Services team will keep you informed throughout 2019 as to significant events in Washington relating to retirement plans. If you have any questions, please do not hesitate to contact your Union Bank Relationship Manager.