SECURE 2.0 Act Passes, Signaling Massive Retirement Savings and Change in Investment Policy

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On March 29, the House of Representatives voted 414 to 5 in favor of the Strong Retirement Guarantee Act of 2022. If passed by the Senate and then enacted by President Joe Bidenthe law could represent a massive shift in economic policy regarding Pension saving and investment.

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The Retirement Savings Legislation, also known as SECURE Act 2.0, expands the original SECURE Act and includes provisions to raise the Required Minimum Distribution Age (RMD) from 72 to 75 over time. time, expand automatic enrollment in retirement plans and improve 403(b) plans.

The original SECURE (Setting Every Community Up for Retirement Enhancement) Act was signed into law by former President Donald Trump in December 2019. This legislation changed the existing retirement savings plan system in terms of RMDs, contributions to IRAs traditional, of 529 uses of the plan for students. loans and making it easier to offer annuities for 401(k) plan administrators.

The SECURE 2.0 law develops all these provisions, in particular by increasing the age of the RMD to 73 years in 2022, to 74 years in 2029 and to 75 years in 2032.

It also requires 401(k) and 403(b) plans to automatically enroll participants when they become eligible, although employees can opt out of this coverage. The auto-enrollment amount starts at a minimum of 3% of salary – but no more than 10% – followed by an increase of 1% each year until it reaches said 10%. There is an exception to this requirement for small businesses with 10 or fewer employees, new businesses (those less than three years old), church plans, and government plans.

The SECURE 2.0 Act also changes policies on pension plan catch-up limits (and indexes IRA catch-up limits to inflation starting in 2023), student loan repayments, and employer matching. such as pension contributions, small employer pension start-up credits. and mutual fund investment trusts (CITs) in 403(b) plans. Additionally, the legislation opens up opportunities for exchange-traded funds (ETFs) in variable annuities.

Speaking about the bill in his March 25 “March-April Work Shift Update” letter, House Majority Leader Steny Hoyer proclaimed, “By expanding automatic enrollment in pension plans provided by the employer, simplifying the rules for small enterprisesand by helping those close to retirement save more for longer, this legislation will help increase Americans’ access to retirement funds and help families save for the future.

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