The legislation includes provisions to help Americans save for retirement. For small businesses, the legislation would create a new financial incentive to offer retirement plans.
Earlier this week, the U.S. House of Representatives passed the “Securing a Strong Retirement Act," or SECURE 2.0. The legislation had previously been introduced in the House by Rep. Richard Neal (D-Massachusetts), chairman of the Ways and Means Committee, and Rep. Kevin Brady (R-Texas), the committee's ranking member.
The bipartisan legislation aims to help a greater number of Americans successfully save for a secure retirement and builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law at the end of 2019.
SECURE 2.0 includes several provisions that seek to help Americans save for retirement. Importantly for small businesses and their employees, the legislation would create a new financial incentive to offer retirement plans. Specifically, it would offer a new tax credit and expand an existing tax credit to encourage small employers to offer defined contribution retirement plans.
The new credit would offset up to $1,000 of employer contributions per employee in the first year and would phase down gradually over five years. Small businesses with 100 or fewer employees would benefit on varying levels from the tax credit depending on their size. Businesses with 50 or fewer employees would be able to take full advantage of the credit.
SECURE 2.0 would also promote saving earlier for retirement by enrolling employees automatically in their company's 401(k) plan when a new plan is created. Additionally, it would increase and modernize the existing federal tax credit for contributions to a retirement plan or individual retirement account, known as the Saver's Credit.
Additionally, the legislation would expand retirement savings options for some nonprofit employees by allowing groups of nonprofits to join together to offer retirement plans to their employees. In another benefit for employees, the legislation allows 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.
The legislation also looks to help those nearing retirement. It offers individuals who are 50 years old and over more flexibility to set aside savings as they approach retirement and allows individuals to save for retirement longer by increasing the required minimum distribution age to 75 years old.
While the legislations prospects remain more uncertain in U.S. Senate, the Big “I" will continue to provide members with updates in the weekly News & Views e-newsletter as warranted.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.