The bipartisan legislation, "Securing a Strong Retirement Act of 2020," aims to help a greater number of Americans save for retirement while also creating a new financial incentive for small businesses to offer retirement plans.
This week, Rep. Richard Neal (D-Massachusetts), chairman of the Ways and Means Committee, and Rep. Kevin Brady (R-Texas), the committee's ranking member, introduced the “Securing a Strong Retirement Act of 2020." This 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.
The “Securing a Strong Retirement Act of 2020" includes several provisions in an effort 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 come down gradually over five years. Businesses with 50 or fewer employees would be able to take full advantage of the credit, while the credit phases out for employers with between 51 and 100 employees. This phase-out would reduce the credit by 2% for each employee exceeding 50.
The legislation 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.
The legislation also expands retirement savings options for some nonprofit employees by allowing groups of non-profits 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 60 years old and older 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.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.
