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Even though one house of Congress is under different leadership, 2019 may continue the recent focus on retirement savings-related legislation. A major bill, the Retirement Enhancement and Savings Act (RESA) of 2019, would cause many of the changes. However, other potential legislative changes may impact the average retirement investor and employers just as much.
So, what are some potential legislative changes coming to retirement plans?
While there are numerous potential changes, let’s focus on six that may have more traction than others:
- Multiple Employer Plans (MEPs)/Pooled Employer Plans (PEPs): Multi-employer plans may finally become reality, thanks to proposed legislation and regulations resulting from an August 2018 executive order. Spreading out the cost, liabilities and administrative responsibility of a plan among multiple employers could strongly benefit smaller employers who otherwise wouldn’t have a retirement plan. Addressed by the RESA legislation, this could certainly result in more employer-sponsored plans.
- Requirement to Sponsor: Two proposed bills would actually mandate employers of a certain size offer a retirement plan. In fact, several states already have similar requirements.
- Extended Establishment Deadline: Also, two proposals look to extend the establishment deadline to businesses’ tax return due date, including extensions.
- Tax Credits for Employers: RESA would increase the maximum tax credit for small employers establishing a retirement plan tenfold! It would also establish a new tax credit for implementing automatic enrollment.
- RMDs and the Stretch IRA: Switching to individuals, a couple of proposed bills could impact required minimum distributions (RMDs). In one proposal, you would not be required to take an RMD if your combined retirement plan balances are below $50,000. A second proposal, also addressed by RESA, would eliminate the stretch IRA for most non-spouse beneficiaries. Instead, they must distribute inherited assets above a certain threshold amount within five years.
- Recovering “Missing” Retirement Accounts: Auto-portability is still being considered by Congress, especially after the Department of Labor commented on such a program in late 2018. This would create automatic portability of small accounts of separated and unresponsive employees to a safe harbor IRA before transferring to a new employer plan.
Consult with your advisor to see how your business, employees, or individual account could be affected by any legislative changes. Ultimately, no one can predict what will come out of the 116th Congress of the United States. However, it seems likely that, as with the Tax Cuts and Jobs Act of 2017, retirement is under the microscope.