New proposals are being considered that are designed to remedy legacy issues by expanding access to retirement savings, making Social Security solvent and protecting income in multi-employer pensions.
CNBC’s recent article, “Congress is considering big changes to the way you retire. Here’s what could make the cut,” says that whether the bills get the go ahead is contingent upon whether they can generate bipartisan support and get both sides of Congress to act. Several pending proposals on Capitol Hill could alter the way current and future retirees live. Here is a rundown of pending retirement-related legislation:
The Secure Act would include many changes to existing retirement rules, but its primary objective is to expand access to retirement savings. It includes measures to let small employers to band together to offer 401(k) plans, give part-time workers access to retirement plans, eliminate the 70½ age limit for individual retirement account contributions and up the age for required minimum distributions to 72, from 70½. The Act would also expand the inclusion of annuities in 401(k) plans and put a 10-year time limit on how long non-spouse beneficiaries can stretch out an inherited IRA.
The legislation would be the most significant change to retirement rules since 2006.
It’s generally a positive bill, but it doesn’t address some key areas contributing to the retirement crisis, like the looming shortfalls to Social Security and rising health costs, as well as other issues that arise as people are living longer.
The Social Security 2100 Act addresses the fact that Social Security’s trust funds are set to run out by 2035, at which point only 80% of promised benefits will be payable. This bill seeks to fix that by extending the solvency of the program into the next century. The bill would give those who are or will be receiving benefits a raise that is the equivalent of 2% of the average benefit. It would also set the new minimum benefit at 25% above the poverty line.
The plan also would increase the amount of non-Social Security income that a person can earn before benefits start being taxed. The new limits would go to $50,000 for individuals and $100,000 for couples, up from today’s $25,000 and $32,000 thresholds.
The Rehabilitation for Multiemployer Pensions Act would let pensions borrow money to remain solvent so they can continue to pay retirees. The legislation would create a Pension Rehabilitation Administration in the Treasury Department and a trust fund from which the loans would be distributed. In addition, multiemployer pension plan sponsors would also still be eligible to apply for loans through the Pension Benefit Guaranty Corporation, under certain conditions. The PBGC will likely use up its assets for these plans by the end of 2025.
Reference: CNBC (August 10, 2019) “Congress is considering big changes to the way you retire. Here’s what could make the cut”