Legislative Spotlight: The Retirement Security & Savings Act

Among the many legislative changes to retirement savings plans that Congress is currently considering is a wide-ranging bill co-sponsored by Sen. Rob Portman (R-OH) and Ben Cardin (D-MD) that includes more than 50 provisions designed to strengthen Americans' retirement security. Sen. Portman and Cardin have partnered on retirement policy legislation for more than two decades and sponsored more than 20 retirement savings bills together, major portions of which have become law.

The Retirement Security & Savings Act

The bill, widely referred to as Portman-Cardin, is a sweeping reform that would change the tax code to improve Americans' ability to save for a secure retirement in four critical ways. It would:

• Allow people who have saved too little to set more aside for their retirement
• Help small businesses offer 401(k)s and other retirement plans
• Expand access to retirement savings plans
• Provide greater flexibility during retirement years

There are a host of substantial changes Portman-Cardin would create. Some of the most impactful include:

New Incentives for Business Owners

Key sections of the bill would make it easier, safer, and less expensive for businesses to start a retirement plan for their employees. These include:

• Offering a way to create a more generous automatic enrollment plan while receiving a safe harbor from costly retirement plan rules
• Establishing a new three-year, $500 per-year tax credit for small businesses that automatically re-enroll plan participants at least once every three years

What's the impact on you? These provisions would make starting and administering a retirement plan much more attractive, because they would ease regulatory burden, increase the startup tax credit, and allow sponsors to get a hefty tax credit for three full years for every participant who re-enrolls in the plan. Business owners who want to start a plan will benefit greatly, as will their employees.

Greater Benefits for Plan Participants

Retirement security is becoming an increasingly important issue, for both older and younger employees. Several provisions in the bill create new chances for savers in both groups to get ahead. They include:

• Increasing the catch-up contribution limits from $6,000 to $10,000 for individuals over age 60.
• Allowing employers to make a matching contribution to an employee's retirement account based on their student loan payment.
• Increasing the age for required minimum distributions (RMD) from age 72 to age 75 by 2032.

What's the impact on you? The benefits for older participants are significant. Those who may not have been able to start saving early enough will be able to set aside more in tax-deferred savings in order to “catch up.” They'll also get the opportunity to let their retirement balance grow for up to three more years by taking advantage of the later age for required minimum distributions. Plan sponsors will also have a new way to help younger participants who might otherwise struggle to set aside retirement savings because of obligations to repay student loans, allowing them to match their contribution to the amount of the loan repayment.

To learn more about how the Retirement Security & Savings Act and other proposed legislation, download our Legislative Overview Chart. This handy reference tool outlines key provisions of recently proposed legislation and how they could impact 401(k) plans, sponsors, and participants.