The Senate passed a $1.7 trillion year-end spending bill Thursday that includes a landmark retirement package that now heads to the House.
The package, known as SECURE 2.0, is made up of three bipartisan bills, including the Securing a Strong Retirement Act of 2022, which the House overwhelmingly passed in a 414-5 vote in March. Ways and Means Committee Chairman Richard Neal, D-Mass., and Ranking Member Kevin Brady, R-Texas, introduced the bill to build upon the SECURE Act, which Congress passed in 2019.
The spending bill, which SECURE 2.0 is attached to, passed the Senate in a 68-29 vote after days of negotiations.
Key provisions of SECURE 2.0 include expanding automatic enrollment for employees joining 401(k) and 403(b) plans, lowering the eligibility requirement for part-time workers to join 401(k) plans from three years of consecutive work to two, and allowing employers to make matching contributions to a 401(k) plan, 403(b) plan or SIMPLE IRA based on qualified student loan payments.
"Automatic enrollment is essential, largely because if younger employees are given an option, they typically would prefer the money in their pocket through the pay mechanism at the end of the week," Mr. Neal said in a press call Wednesday.
Under SECURE 2.0, employers launching 401(k) and 403(b) plans would be required to automatically enroll new employees in those plans at an initial amount of at least 3% — unless the employee opts out — with that amount increasing by 1 percentage point each year until it reaches 10%. The change would take effect in 2025, and existing 401(k) and 403(b) plans would not be impacted.
Another provision increases the age at which plan participants are required to start taking distributions from their retirement plans. The SECURE Act of 2019 increased the required minimum distribution age to 72, while SECURE 2.0 would further increase the RMD age to 73 beginning in 2023 and 75 beginning in 2033.
Mr. Neal said that "people are living longer" and therefore often working longer as well. This provision allows them to delay tapping into their retirement savings, he said.
"It's encouraging that lawmakers are continuing to give retirement policy the attention it needs," said Dan Doonan, executive director of the National Institute on Retirement Security, in a statement. "We're pleased to see provisions in SECURE 2.0 that will improve access to retirement programs and help more workers set aside savings. Far too many Americans face a frightening retirement shortfall."
"We are one step closer to delivering billions in increased retirement savings for millions of workers who need it most," said Wayne Chopus, president and CEO of the Insured Retirement Institute, in a statement. "This includes those facing student loan debt, part-time workers, small-business employees, low-income workers, and military spouses. We fully expect the House to pass this vital financial security legislation this week and send it to President Biden for signature."
The omnibus spending bill still awaits passage from the House, and it must pass by Friday night to avoid a government shutdown.