secure act 2.0 passes house by 414-5 vote

Secure Act 2.0 (HR-2954) passed the House of Representatives on March 29, 2022 by an overwhelming majority 414 to 5.

This bill is intended to provide additional opportunities for Americans to save for retirement.

The short video above some of the key highlights of this bill:

• Expand Catch-Up Contributions (aged 62-65, $10,000+/year)
• Delay RMDs – from age 72 to age 73 (2022), age 74 (2029), age 75 (2032)
• Mandatory/Automatic Enrollment in Retirement Plans for Employees
• Authorize Student Loan Matching for Employers

Expand Catch-Up Contributions

• The current law allows individuals age 50+ to contribute an extra $6,500 per year into their tax-deferred retirement accounts
• Secure Act 2.0 will increase the catch-up contribution amount to $10,000 per year for those age 62-65

Delay Required Minimum Distributions (RMDs)

• The current law requires individuals to withdrawal (and pay taxes on) a Required Minimum Distribution (RMD) from their Retirement Accounts by age 72
• Secure Act 2.0 will increase the age that individuals need to start taking RMDs to age 73 (in 2022), age 74 (in 2029) and age 75 (in 2032).  For individuals that don't need the money, this will help to delay the tax payment requirements on the IRA distributions.

Mandatory/Automatic Enrollment in Retirement Plans for Employees

• Secure Act 2.0 would require certain employers to automatically enroll new employees into their Employer Retirement plan
• The Employees will still have the option to opt-out but this will require an action to do so; rather than the current situation which requires the employee to take an action to opt-in to a Employer Retirement plan.

Authorize Student Loan Matching for Employers

• This provision in Secure Act 2.0 is intended to address the issue of Employees inability to save money in their retirement because they are paying off student loan debt
• Basically, this provision would allow an Employer to match an Employees student loan payment into a Retirement Plan.  For example, if the employee is paying $100/month towards their Student Loan, they Employer could provide a match of $100/month into the Employees Retirement Account

Here is a link to the full text of the bill if you would like to read the actual legislation.

Secure Act 2.0 provides some interesting incentives to improve retirement savings for individuals.

The Senate still needs to pass a companion bill and then it will need to be signed by the President to become law.

We still have some concerns with the lack of focus in Washington on the two large looming financial issues with Medicare (Hospital Trust Fund running out of money to cover expenses by 2026) and Social Security (not able to pay out full benefits by 2034).  Hopefully, these important issues are addressed soon in Washington.