As we approach the end of the year and mid-term elections, expectations for meaningful policy from a lame duck Congress are at a record low. Surprisingly, however, the earlier passage of the Tax Cuts and Jobs Act (commonly referred to as “Tax Reform”) resulted in an unsettled desire among those in the U.S. House of Representatives and U.S. Senate to accomplish something rare – bipartisan legislation improving retirement and savings for millions of Americans.
The two pieces of legislation that have bipartisan support are the Retirement Enhancement and Savings Act (RESA) and the Family Savings Act of 2018 (FSA).
The Retirement Enhancement and Savings Act (RESA)
RESA was introduced by Senator Orrin Hatch (R-UT) and Senator Ron Wyden (D-OR) in March 2018 and has shown to have some bipartisan support. RESA is one of the most comprehensive retirement bills to be introduced as of late, and it would, among other things: tackle reduced required minimum distributions; create a new employer tax credit to offset initial expenses involved with setting up a new 401(k) or SIMPLE IRA plan that includes automatic enrollment; expand multiple employer plans (MEPs); create a safe harbor for plan sponsors electing annuity providers; remove the cap on automatic employee contribution rate increases; permit access to funds for families welcoming a new child; and modify hardship rules. Despite having bipartisan support and the support of industry groups, it has only been referred to the House Committee on Ways & Means and the House Committee on Education and the Workforce, with no further action taken to date.
The Family Savings Act of 2018 (FSA)
The FSA borrows many of its proposed changes from RESA, which could help get it through Congress before the end of the year. The FSA largely focuses on eliminating the required minimum distribution requirements for those with account balances under $50,000 and reducing the required minimum distribution amount for larger accounts, permitting access to retirement accounts to pay for expenses relating to welcoming a new child ($7,500 per spouse, or $15,000 combined), relaxing the commonality rules for MEPs, offering greater portability of accounts to allow those with annuities in a 401(k) plan to transfer their accounts to an IRA without tax, and providing a safe harbor to plan sponsors selecting an annuity provider.
Unlike RESA, the FSA has already passed the House on Sept. 27 (with the vote being 240-177), and has been sent to the Senate where it was referred to the Committee on Finance.