New Retirement Bill Would Raise RMD Age to 75

Congressional leaders came together in a show of bipartisanship last Monday to reintroduce a bill that would raise the required minimum distribution age from 70 ½ to 75 and also help workers pay off their student loans.

Senators Ben Cardin (D-MD) and Rob Portman’s (R-OH) Retirement Security and Savings Act of 2019 shares some provisions with the Retirement Enhancement and Savings Act (RESA) of 2019, which was introduced on April 1, but RESA only raised the RMD age to 72.

Introduced by Senate Finance Committee Chairman Chuck Grassley (R-IA), and ranking member Ron Wyden (D-OR), is similar to H.R. 1994, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which is expected to get a vote on the House floor before Memorial Day weekend.

“Passage of RESA remains a top priority for Sen. Wyden and me,” Grassley last Tuesday emphasized the priority of the passage of RESA, adding that he hopes the House “will send its version of RESA over to us this month.”

That Tuesday morning the Senate Finance Committee held a hearing to explore the challenges in the retirement system. Chairman of the House Budget Committee, Rep. John Yarmuth,  scheduled a hearing for the next day on ways to improve retirement security in America.

The Portman-Cardin bill phases in the RMD age increase over several years and would update mortality tables to reflect longer life expectancies.

The ability of employer-sponsored 403(b) plans to offer collective investment trusts (CITs), a mutual fund-like vehicle used in some 401(k)s and pension plans that can help plan sponsors cut costs would also be expanded in the bill.

The bill has seen support from lobbying groups such as the Insured Retirement Institute, which focuses on the annuity industry. “Section 117 [of the bill] would level the playing field by providing insurance products with the same exemptions as CITs,” the group said in a letter to senators, sparking “a robust and competitive marketplace which is vital to ensure Americans have access to the appropriate savings option for their financial situation.”

The Portman-Cardin Retirement Security and Savings Act would also enable workers to make student loan payments while receiving employer-matching contributions into their retirement account “as if the student loan payments were salary contributions.”

The bill would also:

  • Permit 457(b), 401(a), 401(k) and 403(b) plan participants to make qualifying charitable distributions, which are only allowed from IRA accounts under current law.
  • Allow participants with Roth accounts in 457(b), 401(k), 401(a), and 403(b) plans to roll Roth IRA assets into these plans.

Student Loan Repayment Bill

Senate Finance Committee ranking member Wyden and four colleagues reintroduced similar legislation, the Retirement Parity for Student Loans Act, the same day.

Employers currently may only make matching contributions to a 401(k) retirement plan if employees are also making contributions.

The Retirement Parity for Student Loans Act — co-sponsored by by Sens. Maria Cantwell (D-WA), Cardin, Sheldon Whitehouse, (D-R.I.), Maggie Hassan (D-N.H.), and Sherrod Brown (D-OH) — would allow employers to make matching contributions to a retirement plan while their employees make student loan repayments.

This would mean that if an employee’s student loan payment is $500 and his or her employer matches 50% of retirement plan contributions, the employer would contribute $250 to the employee’s retirement account.

“Millions of college grads are buried under tens of thousands of dollars in student loan debt that prevents them from building their future — buying a home, saving for retirement and starting a family. The sooner workers start to save for retirement the better, and paying down student loans shouldn’t stop them from building their nest egg,” Wyden explained. “While a comprehensive response to the student loan debt crisis is needed, this policy change is an important piece of the puzzle.”

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