At the end of 2018, the Retirement Security and Savings Act of 2018 was introduced in the Senate. While Union Bank & Trust expected it to be reintroduced early this year, as of the date of this writing, it has not been reintroduced.
Instead, the most significant retirement-related legislation introduced thus far in 2019 has been the Retirement Enhancement and Savings Act of 2019 (the “Act”). The Act, which has been introduced in previous Congresses, is worth discussing because it enjoys bipartisan support and is backed by industry advocates. As proposed by the House, the highlights of the Act would include the following:
- Tax Credits — The Act would increase tax credits for small employers that establish retirement plans. In addition, the Act would provide for a larger tax credit for a small employer that implements an automatic enrollment plan. Union Bank notes that increased retirement tax credit provisions have been included in other proposed legislation in the past.
- Remove Caps on Automatic Escalation — A qualified automatic contribution arrangement caps a participant’s automatic deferral rate at 10%. The Act would remove this cap with the goal of expanding retirement contributions and growing participant retirement savings.
- Lift Maximum Age for Contributing to a Traditional IRA — Workers currently cannot contribute to a Traditional IRA after attaining age 70-1/2. Recognizing that many Americans work beyond age 70-1/2, the Act would allow workers to contribute to a Traditional IRA after age 70-1/2.
- Lifetime Income Disclosures — The Act would require defined contributions plans (i.e., 401(k) plans) to provide an annual lifetime income disclosure to participants. The disclosure would show the lifetime monthly payments a participant would receive based on his/her account balance. The Act’s sponsors believe this would be meaningful to participants, allowing them to understand the monthly benefit that their account balance could provide.
In early April 2019, the Senate introduced its version of the Act, largely mirroring the House’s version. In addition, other legislation, such as the Retirement Security and Savings Act mentioned above, include many similar provisions also found in the Act. This indicates broad agreement among Democrats, Republicans, and industry professionals as to what form retirement reform will likely take. While momentum appears to be building, the issue is whether more pressing matters will again delay retirement reform. Union Bank & Trust's Retirement Plan Services team will keep you informed about the Act, and other related retirement legislation. If you have any questions, please do not hesitate to contact a Union Bank Relationship Manager.