The Senate Finance Committee unanimously advanced the bipartisan Enhancing American Retirement Now Act, or EARN Act, on Wednesday. The EARN Act now joins the Senate Health, Education, Labor and Pensions Committee's companion bill, which advanced out of committee on June 14, to form the Senate's SECURE 2.0 package.
The House passed its own SECURE 2.0 bill in March in 414-5 vote.
Sen. Ron Wyden, D-Ore., chairman of the Finance Committee, highlighted four of the EARN act's more than 70 provisions during the committee meeting.
For the first time, a saver's tax credit would be deposited directly into a worker's IRA or 401(k) account rather than being included in any tax refund, and fully refundable, he said.
Second, individuals making student loan payments who are unable to contribute to their retirement will qualify to participate in their employer's retirement plan, Mr. Wyden said. The measure would permit an employer to make matching contributions to a 401(k) plan and other tax-preferred retirement plans on qualified student loan payments.
"While they're paying down their loans, their employers will make contributions to begin building up their retirement accounts," Sen. Wyden said.
The act also will direct the Department of the Treasury to create a new standardized form that retirement plans can use to make rollovers for workers to bring their savings along when they change jobs.
EARN will also permit all employers to allow workers to take distributions from their retirement accounts to pay for long-term care premiums. The distributions will still be taxable, but there will longer be a 10% penalty. "It will mean that more people are able to get high-quality, long-term care insurance coverage in case they need expensive at-home or nursing home care," Mr. Wyden said.
Other committee members noted a provision that provides domestic violence victims with the option to withdraw up to $10,000, penalty free, from their retirement plans for a year following domestic violence and three years to replace the funds.
"I know how important it is for them to have this resource possible at their disposal because quite often this is how the abuser tries to control too many victims, and taking away their access to essential funds that they need to break the chains of domestic violence," said Sen. Catherine Cortez Masto, D-Nev.
Senate leaders are expected to combine the EARN Act with the HELP Committee's Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act, or RISE & SHINE Act.
If the Senate were to pass that combined bill, any differences with the House's SECURE 2.0 bill would have to be worked out before final passage and a completed bill could be sent to President Joe Biden to sign.