Our Thoughts

The SECURE Act

After a two-week spring break, Congress returns with plans to consider bipartisan retirement security legislation that would make it easier for businesses to offer retirement plans and for individuals to save for retirement.

House Majority Leader Steny Hoyer (D-MD) reportedly announced to Democratic lawmakers that the House during the month of May will take up the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (H.R. 1994). Hoyer did not specify exactly when in May the House would consider H.R. 1994, which was previously approved April 2 by the House Ways and Means Committee by a unanimous voice vote, but the legislation has been highly anticipated by industry stakeholders.

Drawing from several bills that were introduced in the last Congress but not enacted, the estimated $16 billion SECURE Act, among other things, would ease the multiple employer plan (MEPs) rules to allow two or more unrelated employers to join a pooled employer plan (PEP) with a designated pooled plan provider (PPP).

Key provisions of H.R. 1994 include:

  • Increasing the auto-enrollment safe harbor cap;
  • Simplifying safe harbor 401(k) rules;
  • Increasing the tax credit for small employer plan start-up costs;
  • Providing portability of lifetime income options;
  • Allowing long-term part-time workers to participate in 401(k) plans;
  • Allowing plans adopting by the filing due date to be treated as in effect as of the close of year;
  • Providing a fiduciary safe harbor for selection of lifetime income provider;
  • Modifying the treatment of custodial accounts on termination of section 403(b) plans;
  • Requiring disclosures regarding lifetime income; and
  • Modifying the nondiscrimination rules to protect longer service participants.

Once H.R. 1994 is approved by the House – presumably on a bipartisan basis – it will be referred to the Senate Finance Committee.

The Chairman of the Senate Finance Committee, Sen. Charles Grassley (R-IA), along with the Committee’s ranking Democrat, Sen. Ron Wyden (OR), on April 1 reintroduced the Retirement Enhancement and Savings Act (RESA). RESA tracks closely with the House’s SECURE Act and will likely be the starting point for discussions when the Senate takes up retirement security legislation. Sen. Grassley has touted his recent efforts on RESA, but so far hasn’t given a specific date on when his committee would act. Presumably, it will be sometime this summer.

Among other things, both RESA and the SECURE Act authorize open MEP arrangements, significantly increase the incentives for a small business owner to adopt a new plan by enhancing the small employer pension plan start-up tax credit, and encourage small business owners to design a plan with an automatic enrollment feature.

In addition to the RESA and the SECURE Act, Rep. Richie Neal (D-MA), chairman of the House Ways & Means Committee, announced during the markup of H.R. 1994 that he and ranking member Kevin Brady (R-TX) will be working on a second more comprehensive retirement House bill with a goal of marking it up prior to the August recess.