What FA’s Need to Know Now When Talking to Clients About the Upcoming SECURE Act 2.0

SECURE Act 2.0 could have a real impact on the futures of many clients planning for retirement today. We examine the significance of the new bipartisan retirement reform?package and what financial professionals need to know about the likely opportunities ahead.

The House bill is titled the Securing a Strong Retirement Act, while the Senate bill is titled the Retirement Security and Savings Act. Following the first Setting Every Community Up for Retirement Enhancement (SECURE) Act signed into law at the end of 2019, these bills aim to further strengthen Americans’ retirement security by helping small businesses offer 401(k)s and other retirement plans, thereby expanding access to retirement savings plans for low- and middle-income Americans without coverage and providing more certainty and flexibility during Americans’ retirement years. Let’s look more closely at the bills and what financial professionals need to know in order to confidently discuss it with their clients. ?

While the House and Senate bills do not mirror each other exactly, they do substantially overlap. Most notably, both bills seek to expand coverage and increase retirement savings by:

• providing small business incentives to offer retirement plans,
• enhancing the Saver’s Credit,
• increasing the required minimum distribution (RMD) age,
• removing RMD barriers for certain types of annuities, and
• ?allowing for higher catch-up contributions.

Your?required minimum?distribution?is the minimum amount you must withdraw from your account each year.

• You can withdraw more than the minimum required amount.
• Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

For additional information on RMDs, please visit the IRS’ official website here [link: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds]

Both bills include language designed to increase auto-enrollment and auto-escalation for newly established plans, albeit taking different legislative approaches. Additionally, they both allow for the treatment of student loan payments as elective deferrals for purposes of matching contributions.

There are also notable differences between the two bills. The House bill, introduced by Ways and Means Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-Texas), would clarify that 403(b) plans may be maintained on a multiple employer plan (MEP) basis. It would also require defined contribution plans, relying on the 2020 e-delivery regulations, to provide a paper benefit statement at least once annually. The Senate bill, introduced by Senators Ben Cardin (D-Maryland) and Rob Portman (R-Ohio), allows for 403(b) plans to invest in Collective Investment Trusts (CITs) and provides the securities law exemption needed to allow for such investment.

Also of note, during the Ways and Means Committee mark-up, in an effort to make the House bill deficit-neutral, the catch-up contribution provision was modified to “Rothify” future catch-up contributions. Essentially, the House bill would keep the catch-up age at 50 but increase the limit by an additional $10,000 per year for employees at ages 62, 63, and 64, providing that effective in 2022, all catch-up contributions to 401(k) plans must be made on an after-tax, Roth basis. The Senate bill simply allows for the catch-up contributions to apply to participants who have attained at least age 60 by the close of the taxable year, and the contributions could be made on a Roth or traditional basis.

Recent changes

On March 29, 2022, the House passed the Securing a Strong Retirement Act by a strong bipartisan vote of 414 to 5. Prior to coming to the floor, a House Education and Workforce Committee’s bill, the Retirement Improvement and Savings Enhancement (RISE) Act, was merged into the final House bill.?The House package has been reported to the Senate where it awaits further action.

The Senate version of this act, titled the Retirement Security and Savings Act, is moving through the process in a slower fashion, as is typical in the Senate. The Senate Finance Committee, which has primary jurisdiction of the bill, has held hearings with stakeholders advocating for the bill, but has yet to hold a formal mark-up. However, Finance Committee Chairman Ron Wyden (D-Oregon) has expressed his intention to develop another bipartisan retirement package in the months ahead. He also made clear his desire to see other committee members’ bills, in addition to the Retirement Security and Savings Act, be considered as part of a final bipartisan package. Of course, with recognition that there is momentum behind a bipartisan legislative package, there are plenty of retirement and savings focused bills that have been introduced in the Senate, and not only by members of the Finance Committee.?

On March 29, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing focused on improving retirement and savings. At the hearing, Committee Chairwoman Patty Murray (D-Washington) announced her intention to introduce a bipartisan retirement legislative package later this spring with Ranking Member Richard Burr (R-North Carolina).

The state of play

The expectation is that later this year, as the Cardin-Portman bill moves through the Finance Committee process, additional Senators’ provisions will be added, and ultimately there will be negotiated language from the Senate HELP Committee that will also need to be included for there to be consideration of a final package on the Senate floor.?

As we approach the November midterm elections, there will be momentum to pass this next phase of significant bipartisan retirement reform. Both Congressman Brady and Senator Portman are retiring at the end of this Congress. House Democrats are facing a tough election season. The prime champions of retirement reform have a great interest in bringing this package across the finish line prior to the end year.?

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Invesco US Government Affairs

Andy Blocker

Global Head of Public Policy & Head of US Government Affairs

Andy Blocker is Global Head of Public Policy & Head of US Government A?airs at Invesco. Mr. Blocker works across Invesco’s three regions – the Americas, EMEA, and Asia Pacific – to bring global strategic leadership and alignment to Invesco’s public policy positions and engagement. He also leverages the political and policy expertise of Invesco’s public policy teams around the globe to provide timely insight to clients and portfolio managers. In his US focused role, Mr. Blocker drives Invesco’s legislative and regulatory advocacy initiatives with policymakers, engages with clients and opinion leaders on public policy developments, and seeks to maximize Invesco’s reputation and influence among key policy makers and stakeholders.

Mr. Blocker joined Invesco in 2018. Prior to joining the firm, he served as executive vice president of public policy and advocacy for the Securities Industry and Financial Markets Association (SIFMA), where he led a team of engaging lawmakers and regulators on international, federal, and state issues impacting the financial services industry. Before that, Mr. Blocker spent five years as managing director for UBS’ US Office of Public Policy, focusing on lobbying, client service, and education for individual and institutional clients. He also served as vice president of government relations for the New York Stock Exchange, as managing director of government and international affairs for American Airlines, and held a role at the White House as special assistant to the president for legislative affairs. Mr. Blocker began his career as a financial analyst for Bell Atlantic Corporation. He is a frequent guest on CNBC, CNBC Asia, Bloomberg, and Yahoo! Finance.

Mr. Blocker earned a BA degree in economics from Harvard University and an MBA in international business from Georgetown University.

Jennifer Flitton

Senior Vice President of Federal Government Affairs

Jennifer Flitton is Senior Vice President of Federal Government Affairs with the US Government Affairs team where she advocates on behalf of Invesco’s policy initiatives with policymakers and regulators, and ensures the firm is an influential part of the Washington conversation. Jen joined Invesco from the Securities Industry and Financial Markets Association, where she led lobbying initiatives on behalf of the asset management and broker dealer industries. Jen spent 16 years on Capitol Hill, last serving as the Deputy Chief of Staff and Legislative Director for Congressman Patrick McHenry, and as Congressman McHenry’s designee to the House Financial Services Committee’s Oversight and Investigations Subcommittee.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

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