Retirement Plan Legislation | RESA | SECURE | Rea CPA

What’s Going On With Retirement Plan Legislation?

Retirement Plan Legislation | Ohio CPA Firm
There is currently legislation in the House and Senate aimed at helping employees successfully save for retirement. Read on to learn more.

I don’t normally pay much attention to proposed legislation because so often it has little chance of becoming law, but amidst all the wrangling over the Mueller Report, there are currently some helpful pieces of retirement plan legislation in Congress that just may have the bi-partisan support needed for passage. There is currently legislation in both the House and Senate that seek to expand the number of employees covered by employer retirement plans and basically help Americans be more prepared for retirement. The best opportunity for employees to successfully save for retirement is through a plan offered at work where they can defer contributions directly from their paycheck and not be tempted not to save.

The SECURE (Setting Every Community Up for Retirement Enhancement) Act recently passed the House Ways and Means Committee and should be on the House floor soon. The Senate Finance Committee introduced its Retirement Enhancement and Savings Act (RESA), bill but no committee action is scheduled yet.

The SECURE bill has bipartisan support and aims to enhance the available tax breaks for retirement savers and encourage more people to participate. It does not contain any provisions regarding open multiple-employer plans (MEPs). With bi-partisan support, there should be a good chance that the SECURE Act will pass the House.

Also read Proposed MEP Legislation Would Undermine Fiduciary Protections

The primary goal of the RESA bill is to reduce governmental reporting and audit requirements for open MEPs. This would allow unrelated employers to band together to share the costs of a single platform to reduce the costs involved with providing retirement plans to employees at small businesses. RESA will also repeal the maximum age for Traditional IRA contributions.

Both bills would also curb the tax deferral benefits of “stretch” IRAs, which limit required distributions on an inherited IRA to avoid a large tax bill by naming children, grandchildren and great grandchildren as beneficiaries in order to extend the tax-deferred growth for years beyond the life of the account holder.

Under the RESA bill, these “stretches” would be limited to aggregate account values under $450,000. Amounts over this would have to be distributed within five years of the death of the account owner with certain exclusions. The SECURE Act is a little different as it has no minimum account value and would limit payouts to 10 years.

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It remains to be seen whether the legislation enabling the widespread adoption of open MEPs will be included in the final reconciliation bill. While there is bi-partisan support, the devil is in the details. There are considerable concerns over fiduciary issues that are inherent in any open MEP solution such as, how are service providers compensated and held accountable? Under current law, employers are responsible for monitoring the service providers and fees of their plans, and plan sponsors are not permitted to be compensated for offering a retirement plan. With an open MEP design, it is uncertain who the plan sponsor is and who determines and monitors plan fees.

If such legislation does eventually pass, it would be one of the biggest disruptions to the industry in many years. Advisors should pay close attention to this issue. You can read my retirement plan concerns expressed in an article last year. You can learn more about the proposed legislation at:

  • SECURE Act
  • RESA Bill

We appreciate your partnership in serving our many retirement plan clients. Please call me if you want to discuss any of the proposed legislation mentioned in this article or any other issues impacting these retirement plans.

By Paul McEwan, CPA, MTax, AIFA (New Philadelphia office)

Read the following articles for more retirement plan guidance:
Another Great Way Plan Advisors Can Add Value
Sacerdote v. N.Y. University: A Cautionary Tale To Plan Fiduciaries
How a Cash Balance Plan 401(k) Will Secure Your Retirement