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1 1 (May 24, 2019)

handle is hein.crs/govzvt0001 and id is 1 raw text is: k ~ Congressional Research Service Ii o rg the leg slatve debaN s nce 1914 Updated May 24, 2019 The SECURE Act and the Retirement Enhancement and Savings Act Tax Proposals (H.R. 1994 and S. 972) Both the House and the Senate are considering legislation that addresses issues associated with tax-favored retirement plans. On May 23, the House passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, H.R. 1994. Chairman Grassley and Ranking Member Wyden of the Senate Finance Committee have introduced the Retirement Enhancement and Savings Act of 2019, S. 972. The two bills have a number of similar provisions. Many of the provisions were also included in legislation passed by the House at the end of the 115th Congress (H.R. 88). The Grassley-Wyden bill has also been introduced in past Congresses. H.R. 1994 The SECURE Act has four parts: provisions that expand benefits for retirement savings, administrative improvements, certain other benefits, and revenue provisions. Provisions apply both to employer plans (in which employers set up either defined benefit or defined contribution plans for their employees) and individual retirement accounts (IRAs). IRAs include traditional accounts in which contributions are deducted and withdrawals taxed and Roth IRAs that simply exclude earnings from taxation. Expanded Benefits for Retirement The proposal liberalizes the treatment of multiple employer retirement plans (generally plans provided by more than one employer in the same industry) by providing that failure of one employer to satisfy plan requirements will not cause all plans to fail. The proposal also provides for the transfer of assets for that employer to another plan. It also establishes pooled employer plans that do not require a common characteristic and can be administered by a single entity, simplifying administrative costs. The proposal includes some provisions to further encourage automatic enrollment in employer plans, including raising the cap on automatic contributions from 10% to 15% of employee compensation. It also increases flexibility in adopting certain safe harbor rules from antidiscrimination issues via employer contributions. The proposal also provides for small employer pension startup costs. The credit is currently the lesser of $500 or 50% of startup costs. The proposal changes the flat dollar amount to be the greater of (1) $500 or (2) $250 times the number of non-highly compensated employees, capped at $5,000. It also increases the credit by $500 for small employers that establish automatic enrollment plans. Small employers have no more than 100 employees and the credit applies for up to three years. https:crsreport Several changes are made to individual retirement accounts, including allowing non-tuition fellowships and stipends to be counted as compensation (IRA contributions cannot exceed compensation) and repealing the prohibition on contributions to traditional IRAs by those aged 70'2 and older. Other provisions impacting retirement plans include prohibiting plans from making loans through credit cards and similar arrangements; allowing the transfer of lifetime income investments (annuities) between plans or as a distribution if no longer allowed as an investment option in a plan; allowing custodial accounts on termination of certain plans (Section 403(b) plans) to be converted into IRAs; clarifying which individuals can be covered by church-controlled organization plans; requiring plans to allow participation by long-term employees working more than 500 but less than 1,000 hours per year; allowing penalty-free withdrawals from retirement plans for birth of a child or adoption; increasing the age for taking required distributions from retirement plans from 70'2 to 72; allowing an alternative minimum funding rule for community newspaper plans; and treating difficulty of care foster care payments as compensation for the purpose of contribution limits to retirement plans. According to the Joint Committee on Taxation, these provisions cost $14.6 billion over FY2019-FY2029, with the largest cost ($8.9 billion) due to increasing the age for required minimum distributions to 72. The multi-employer plan proposals cost $3.4 billion and the withdrawals for birth and adoption cost $1.2 billion. Administrative Changes The proposal also has some administrative changes. It would allow due dates for establishment of employer plans on the tax filing day rather than year-end; provide for combined annual reporting for all plans in a group; require defined contribution plans to provide a lifetime income discloser; provide a safe harbor to satisfy prudence requirements for fiduciaries who are trustees of plans; modify the nondiscrimination rules so they are not triggered by participation in the plan of older, longer-service employees; and reduce the premiums of the Pension Benefit Guaranty Corporation (PBGC) for cooperative and small employer charity plans that are a subset of multiple employer plans. The proposal would also require plans to use the same discount rate used for benefits to measure unfunded liabilities. According to the Joint Committee on Taxation, these provisions cost $1.4 billion for FY2019-FY2029, with $1.3 billion due to the PBGC revisions. 0.con S

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