For retirement changes in Secure 2.0, December is do or die time

For supporters of Congressional proposals aimed at improving the American retirement system, these few weeks promise to be difficult.

Lawmakers return to Washington next week to complete the so-called lame session – the legislative period between the midterm elections and the new Congress, which begins Jan. 3. While no specific agenda has yet been released, proponents of the pension change proposals collectively known as “Secure 2.0” hope it will be among the pieces of legislation that cross the finish line.

“All signs point to action being taken by Congress before they leave … but the exact date and time, no one knows,” said Paul Richman, director of government and policy affairs at the Insured Retirement Institute.

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Secure 2.0 aims to build on the improvements to the pension system introduced by the 2019 Security Act. These changes included better access for part-time workers to pension benefits and raising the age at which required minimum distributions, or RMDs, from certain retirement accounts must begin – to 72 years old from 70½.

• Facilitate worker backup and access emergency fund.
• Increase access to the so-called savers tax credit, which is available to low- and middle-income workers.
• Increase the additional amounts – called catch-up contributions – that people aged 50 or over can pay into their retirement accounts.
• Require that all catch-up amounts be paid as Roth (after tax).
• Allow part-time workers to qualify for their company’s 401(k) after booking at least 500 hours per year for two years instead of three years.
• Make it easier for employers to contribute 401(k) plans on behalf of employees who pay student loans instead of saving for retirement.
• Raise when RMD must begin at age 75 from the current age of 72.
• Reduce the penalty for non-compliance with MSY to 25% and, in some cases, 10%, from the current 50%.
• Allow people to put more money into a qualified longevity annuity contract, or QLAC.

Differences between the bill passed by the House and the Senate proposals would need to be resolved — an ongoing process, Richman said — before a final package could be considered.

This year, the House adopted its version of Secure 2.0, the Securing a Strong Retirement Act (HR2954)end of March with a bipartisan vote of 414-5.

In the Senate, the committees responsible for retirement provisions have approved proposals that collectively form the basis of this chamber’s Secure 2.0 version: the Committee on Health, Education, Labor and Pensions has advanced the so-called Rise & Shine Law (S.4353) in June, and the Finance Committee in September approved a bill known as the EARN Law (S.4808).

In September, Congress adopted a palliative measure to fund the government’s 2023 fiscal year, which started from October 1 to December 16. Lawmakers would either have to pass a spending bill for the remainder of the fiscal year or pass another short-term stopgap measure — or risk a government shutdown.

The original Secure Act of 2019 was finalized in December of that year as part of a spending bill.

There may be other bills that Secure 2.0 should also tie into, such as the National Defense Authorization Act, Richman said.

If this series of proposed amendments does not become law this year, the entire legislative process will have to start again at the next Congress.

“Nobody wants to see that,” Richman said. “You have to get bills reintroduced, go through committees again, have them voted on by the floor – it’s a very long process.”