Legislation that builds on the House-passed SECURE Act 2.0 bill and includes provisions advanced by the American Retirement Association has passed a significant milestone in the Senate.
The Senate Health, Education, Labor and Pensions (HELP) Committee approved the legislation, officially named the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE & SHINE) Act (S.4353)by a unanimous vote on June 14.
The bill is now cleared for consideration by the full Senate, where it is expected to be merged with upcoming legislation by the Senate Finance Committee. Once the Senate approves its counterpart to the House SECURE 2.0 bill, which is expected later this summer or early fall, the House and Senate bills will be merged into one bill. final law, which is not expected to be passed before the end of the year, probably in a lame session after the November elections.
Sen. Patty Murray (D-WA), chair of the Senate HELP committee, and Sen. Richard Burr (R-NC), the committee’s ranking Republican, introduced their bill June 7 after posting a discussion draft . The package is intended to build on SECURE 2.0, which the House of Representatives passed in March, as well as the Retirement Improvement and Savings Enhancement (RISE) Act introduced in the House and the Security and Savings Act. for the retreat presented by Senators Ben Cardin (D-MD) and Rob Portman (R-OH).
RISE & SHINE versus SECURE 2.0
Although the RISE & SHINE Act shares some similarities with SECURE 2.0, it also diverges in some respects. For example, probably the biggest difference is that the RISE & SHINE Act does not include the mandatory auto-enrollment provision for companies with more than 10 employees included in SECURE 2.0, but rather seeks to include an automatic re-enrollment provision every the three years. RISE & SHINE also includes an emergency savings component of up to $2,500 that would be tied to CD plans, while SECURE 2.0 does not include such a provision.
Similar provisions in both bills include:
- allow 403(b) plans to participate in multiple employer (MEP) plans and pooled employer (PEP) plans;
- reduce the requirement for part-time workers to participate in an employer-sponsored retirement savings plan from three years to two years;
- eliminate unnecessary plan requirements related to non-registered participants; and
- directing the DOL to change its regulations regarding asset allocation fund performance indices.
Features of RISE & SHINE that are not in SECURE 2.0 include:
- allow certain incidental expenses related to plan design to be paid from plan assets (the ARA has advocated this provision);
- make various clarifications to the PEP, including that a designated trustee is responsible for collecting contributions in a PEP;
- clarify that plans filing Form 5500 as part of a group of plans only need to submit an audit opinion if they have 100 or more participants (the ARA has advocated this provision);
- increase the limit on mandatory distributions from $5,000 to $7,000;
- specifying that for the purposes of cash balance plans, the credited interest rate which is treated as prevailing and as the projected credited interest rate is a reasonable projection of that floating interest rate, subject to a maximum of 6% (this clarification will allow plan sponsors to provide larger salary credits for older workers with longer service); and
- directing the Departments of Treasury and Labor to change regulations to allow sponsors of defined contribution plans to bundle certain notices of participation required. (SECURE 2.0 includes a provision directing agencies to study the matter and report to Congress.)
Provisions of SECURE 2.0 that are not in RISE & SHINE include:
- enhancing the credit for start-up costs of pension plans for small employers;
- enhance Crédit Épargnant by simplifying the loan rate;
- increase the catch-up contribution ceiling for people aged 62 to 64;
- treat student loan repayments as optional deferrals for matching contribution purposes;
- increase the age of the required start date for mandatory distributions;
- remove the minimum distribution barriers required for life annuities; and
- the establishment of a database of lost and found on retirement savings.
During the bill’s scoping by the Senate HELP committee, the committee approved two amendments by voice vote and rejected another along party lines:
- QDRO: The committee approved an amendment proposed by Sen. Tina Smith (D-MN) and co-sponsored by Sen. Lisa Murkowski (R-AK) that seeks to recognize the sovereignty of tribal courts by allowing them to issue a qualified relationship order. (QDRO), so that there is parity between tribal and state courts.
- Inflation: The committee also approved an amendment proposed by Sen. Roger Marshall (R-KS) directing the Department of Labor to study the impact of inflation on retirement savings.
- ESG rejection: Sen. Mike Braun (R-IN) proposed an amendment to clarify that pension plan trustees cannot use non-monetary factors when reviewing plan investments and must act solely in the financial interests of participants. on a diet. Essentially, the amendment was intended to preempt proposed regulations by the Department of Labor that would allow plan trustees to consider, for example, climate change and other environmental, social and governance (ESG) factors when selecting investments and exercise shareholder rights. The amendment was defeated by the committee along party lines by a tie vote of 11-11.
Members also raised two issues they would like to see prioritized as the legislation moves through Congress:
- Financial Freedom Act: Sen. Tommy Tuberville (R-AL) discussed his Financial Freedom Act (S. 4147) introduced May 5 to prohibit the DOL from issuing guidelines limiting the type of investments that self-directed investors of a 401 account (k) may choose through a brokerage. the window. The original focus of Tuberville’s legislation was DOL guidelines warning plan trustees to include cryptocurrencies in their investment ranges, but he noted that the legislation goes beyond crypto, so that it allows retirement savers to have complete control over how they invest their 401(k)s. Tuberville did not call for a vote on his bill, but committee chair Murray said she would work with him to find a bipartisan solution.
- Volunteer firefighters: Similarly, Republican Sen. Richard Burr (R-NC) raised the issue of allowing volunteer firefighters and emergency medical service workers to join the government pension plan of the locality or state where they work, which they currently cannot do. Pushing for change, Burr noted that he would not support a final year-end retirement plan if it did not include this fix, to which Murray responded that she would continue to work with him to achieve this. to an acceptable resolution.