Massive Budget Bill Includes Major Retirement Savings Package

On Tuesday, House and Senate lawmakers unveiled the text for a massive year-end budget bill that includes bipartisan retirement savings legislation, (ie, the SECURE 2.0 Act of 2022). Modeled after a bill that passed the House of Representatives in 2021, the SECURE 2.0 Act of 2022 could reshape retirement tax incentives for years to come. That’s because if passed, the retirement savings package would make numerous changes to existing retirement account rules and some related tax breaks. Supporters of the legislation say that those changes are designed to encourage more people to save for retirement through 401(k), 403( b), and IRA plans. Subscribe to Kiplinger’s Personal Finance Be a smarter, better informed investor. Save up to 74% Sign up for Kiplinger’s Free E-Newsletters Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail. Profit and prosper with the best of Kiplinger’s expert advice – straight to your e-mail. SECURE 2.0 Act of 2022: Proposed Changes to Retirement Plan Rules and Tax BreaksSome of the more than one hundred provisions in the SECURE 2.0 Act of 2022 that could impact your retirement savings in the coming year, or years, are briefly highlighted here. But stay tuned to Kiplinger for more detailed information on these, and other, aspects of the 2022 version of SECURE 2.0. plan beginning at age 72. If passed, SECURE 2.0, 2022, would increase the minimum required distribution age to 73 beginning January 1, 2023. That’s a key RMD change you could see in the new year, but then in ten years, the RMD age would move to 75. Small Incentives to Contribute to a Retirement Plan: Secure 2.0 2022 would allow your employer to offer small financial incentives (eg, low-dollar gift cards) to help boost employee participation in a workplace retirement plan. This provision would become effective for plan years after the law passes (if it does). to cover unforeseeable or immediate financial needs. That emergency distribution of up to $1,000 could only be taken once during the year, but wouldn’t be subject to the usual additional 10 percent tax that applies to early distributions. But: if you choose not to repay the distribution within a certain time, you wouldn’t be allowed to take other emergency distributions for three-years. Other hardship withdrawals are provided for in the proposed legislation including for 403(b) plans. (Currently, distribution rules for 403(b) and 401(k) plans are different, so SECURE 2.0, 2022, would conform to those rules.) Also, under the legislation, penalty-free withdrawals, on small amounts of money from retirement plans in cases involving domestic abuse, would be allowed. Automatic Enrollment in Retirement Plans: Beginning in 2025, the SECURE 2.0 Act of 2022 would expand automatic enrollment in retirement plans. The rationale for this is that automatic enrollment in 401(k) plans has been shown to increase participation. With some exceptions for small businesses, the bill would require 401(k) and 403(b) plans to automatically enroll eligible participants, who would then be able to opt out of participation, if desired. Higher Catch-up Contribution Limit: Right now , if you are 50 or older you can make catch-up contributions to your retirement plan up to certain limits. SECURE 2.0, 2022, would increase those limits, beginning in 2025, to the greater of $10,000 or 50 percent more than the regular catch-up amount if you are 60, 61, 62, or 63 years old. After 2025, those amounts would be indexed for inflation. Saver’s Match: Beginning in 2027, the SECURE 2.0 Act of 2022 would replace the nonrefundable Saver’s credit for certain IRA and retirement plan contributions with a federal matching contribution that is deposited into your IRA or retirement plan. The match would be 50% of IRA or retirement plan contributions up to $2,000 per person. However, some income limits, and phase-outs, would apply. Employer Fund Match for Student Loan Payments: Under the SECURE 2.0 Act of 2022, your employer could make a matching contribution to your retirement plan account based on your student loan payment amount. This is designed to address the fact that high student loan debt can keep people from saving for retirement. This would become effective in 2024. Retirement Savings “Lost and Found”: The SECURE 2.0 Act of 2022 would enable the creation of a searchable database to help people find retirement benefits that they lost track of. The savings retirements “lost and found” would be housed at the Department of Labor and would be created within two years of the bill’s enactment. Provisions that could affect your retirement savings account (and in turn, potentially your taxes and tax breaks), if the bill is passed. Some of those provisions involve everything from part-time worker access to employer retirement plans, and small business tax credits, to contributions to SIMPLE, and SEP plans. Other provisions address issues surrounding stock ownership and savings bonds.In any case, as the bill makes its way through Congress, stay tuned to Kiplinger for updates and detailed information on how the legislation might impact you.2023 Omnibus Budget BillAnd if you’re curious about Congress’ massive spending proposal…the $1.7 trillion fiscal year 2023 omnibus appropriations bill contains over $770 billion for non-defense spending. That includes increased funding for nutrition, affordable housing programs, healthcare research, education, and childcare. There’s also funding in the budget bill for assistance to Ukraine, and NATO allies, and more than $40 billion for assistance to people dealing with US natural disasters. like wildfires, flooding, and hurricanes. The near two trillion-dollar spending bill also increases funding for Veteran Administration medical care and allocates $858 billion in defense spending.

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