United States

House Passes ‘Secure Act 2.0.' Here's What That Means for Retirement Savings

Lucy Lambriex

The House of Representatives has passed a bill that will improve the retirement savings system for U.S. workers, moving it closer to becoming law.

The Securing a Strong Retirement Act, H.R. 2954, also called the Secure Act 2.0, was approved on Tuesday with a bipartisan vote of 414-5. Now, the legislation heads to the Senate.

"H.R. 2954 will help all Americans successfully save for a secure retirement by expanding coverage and increasing retirement savings, simplifying the current retirement system, and protecting Americans and their retirement accounts," said House Ways and Means Committee Chairman Richard Neal, D-Mass., ahead of the Tuesday vote. "Too many workers reach retirement age without having the savings they need."

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The bill builds on the first Secure Act, which was passed in 2019. In 2021, the House Ways and Means Committee approved the bill in a unanimous, bipartisan voice vote.

"It has some provisions that are pretty favorable in terms of allowing individuals to save more for retirement," said Lisa Featherngill, national director of wealth planning at Comerica Bank. "And it has some provisions that are helpful for younger savers."

Highlights of the bill

The second Secure Act has a number of provisions that would benefit retirement savers and employers.

One would require employers to automatically enroll eligible workers in 401(k) plans at a rate of 3% of salary, which would increase annually until the employee is contributing 10% of their pay. Employees could opt out or select a different contribution amount. Businesses with 10 or fewer employees or are less than 3 years old would be excluded from the mandate.

The plan would also make changes to how much savers can contribute if they're near retirement, and when retirees need to pull money from their accounts. Individuals age 62, 63 and 64 could make catch-up contributions of $10,000, up from $6,500.

It would also increase the starting age for required minimum distributions to 73 in 2022, 74 in 2029 and 75 by 2032, up from the current 72.

Student loan borrowers would also get a retirement boost via the legislation, which would basically allow employers to match student loan payments as contributions to retirement.

"Let's say you have somebody with significant student loans and really can't contribute much to their 401(k)," said Featherngill. "This would allow them the opportunity to still get an employer match on the amount paid on their student loans."

Another potential change that could help young workers is that they would be able to elect that all or some of an employer match be applied to a Roth 401(k), which would provide a tax benefit when they get to retirement, said Featherngill.

Beyond these features, the legislation would make other changes for survivors of domestic abuse, small business owners and low-wage workers eligible for certain tax credits. It would also create a national database for Americans to reclaim lost retirement accounts.

What's next

Now that it's passed the House, the legislation will be sent to the Senate for possible action in April.

There are other bills in Congress that overlap with the Secure Act, and if passed first would make similar improvements to retirement saving.

The House Education and Labor Committee in February amended the RISE Act, H.R. 5891, which also addresses retirement savings plans.

There are two similar bills in the Senate that address retirement savings. One is the Retirement Security and Savings Act, S. 1770, and the other is the Improving Access to Retirement Savings Act, S. 1703.

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