House Ways and Means Committee Chairman Richard Neal, D-Mass., and ranking member Kevin Brady, R-Texas, introduced bipartisan legislation Tuesday, the Securing a Strong Retirement Act of 2020, which would boost the required minimum distribution age from 72 to 75.
The legislation builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.
Under current law, generally, those aged 72 and older must take RMDs from employer-sponsored defined contribution plans and traditional IRAs.
Neal and Brady’s bill would increase the age to 75, and would be effective for distributions required to be made after Dec. 31, 2020, with respect to individuals who turn 72 after that date.
“Increasing the age for required minimum distributions will allow Americans to keep more of their savings in retirement plans for a longer period of time,” the bill states.
The bill also exempts individuals with account balances of $100,000 or less on the last day of the year from the RMD rule. The provision would apply to distributions required to be made in calendar years beginning more than 120 days after the date of enactment.
“COVID-19 has only exacerbated our nation’s existing retirement crisis, further compromising Americans’ long-term financial security,” Neal said in a statement.
“In addition to meeting workers’ and families’ most pressing, immediate needs, we must also take steps to ensure their wellbeing further down the road. With the Securing a Strong Retirement Act, Ranking Member Brady and I build on the landmark provisions in the SECURE Act and enable more workers to begin saving earlier — and saving more — for their futures.”
Added Brady: “Our legislation will make it easier for folks to save, protect Americans’ retirement accounts, and give workers more peace of mind as they plan for the future.”
Other provisions of the bill, available here, include the following:
- Allow 403(b) plans to be eligible to be structured as collective investment trusts. The provision would be effective for amounts invested after Dec. 31, 2020.
- Allow individuals to pay down a student loan instead of contributing to a 401(k) plan and still receive an employer match in their retirement plan;
- Index to inflation the catch-up contribution limit to IRAs for those aged 50 and over. The provision would be effective for taxable years beginning after 2021.
- Remove RMD barriers for life annuities. Annuities would be allowed to satisfy the RMD rules if they increase by up to 5% per year; consist of a lump-sum payment in satisfaction of future annuity payments using reasonable assumptions as determined in good faith by the issuer or accelerates the receipt of annuity payments to be received in the following 12 months; provide dividends or similar amounts; or a death payment equal to the amounts paid for the annuity contract less prior payments.
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