The budget deal released by Congress and set to be voted on by the House and Senate later this week includes the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
This is a positive development — the legislation contains numerous reforms that will assist small businesses in helping their employees save for retirement. In addition, it gives workers greater flexibility to save and older workers and retirees more control over their savings.
The law will make it easier to set up multiple-employer plans, which are commonly used by small businesses and independent workers as a pathway for retirement savings. These plans help employers offer workplace savings plans to their employees by removing many administrative hassles that have prevented small employers from offering their own independent plans.
The SECURE Act further encourages small employers to set up retirement plans by increasing the employer tax credit for starting a new retirement plan from $500 to $5,000. And that’s not all.
The bill would require employers to include long-time, part-time workers in 401(k) plans, and new parents would be able to withdraw from an Individual Retirement Account or 401(k) penalty-free. It also helps older workers by repealing the maximum age for contributions to an IRA and increasing the age when you are required to take a distribution from a retirement account.
To be clear, the SECURE Act is not perfect.
Despite unanimously passing the House Ways and Means Committee, Speaker of the House Nancy Pelosi removed a provision to expand 529 Education Savings Accounts in order to appease teachers’ unions and liberals who oppose homeschooling.
Lawmakers could have also made other improvements to retirement savings like the reforms found in Sen. Rob Portman’s Retirement Security and Savings Act.
However, none of these are reasons not to pass the SECURE Act.
Passage of this legislation will strengthen retirement savings and offers an opportunity for lawmakers to help workers, families, and small businesses.