Jon VoglerTime to read: 2 min

On Sept. 27, the House of Representatives approved retirement reform legislation (the Family Savings Act) as part of the “Tax Reform 2.0” package of bills.

The House also passed the American Innovation Act of 2018, which is the small business innovation portion of the Tax Reform 2.0 package. On Sept. 28, it also passed the Protecting Family and Small Business Tax Cuts Act of 2018, which is the part of the package that would make permanent various individual and small business tax provisions from the Tax Cuts and Jobs Act.

The version of the Family Savings Act which passed is very similar to the measure I described in a previous blog entry. Among other items, the bill would:

  • Relax the minimum distribution requirements for retirement savings.
  • Open up multiple employer plan (MEP) membership so that small companies without a common interest could band together to sponsor plans.
  • Create a new Universal Savings Account.
  • Improve the rules relating to election of safe harbor 401(k) status by eliminating the notice requirement for non-elective contributions.
  • Permit plan participants to roll over their lifetime income investment to another retirement savings vehicle if the plan sponsor decides to discontinue that investment option in the plan.
  • Allow employers to adopt a qualified plan up to the due date of their tax return.
  • Repeal the maximum age for traditional individual retirement account (IRA) contributions.
  • Modify nondiscrimination rules to protect older, longer-service participants.
  • Allow families to access their retirement accounts for new child expenses without payment of the 10% penalty tax for early distributions.
  • Expand 529 education savings accounts.

The latest bill includes four key amendments

The bill also reflects four changes made via amendment before the full House vote was taken. These additional provisions would: (a) create a fiduciary safe harbor with respect to the selection of an insurer for a guaranteed retirement annuity contract in a defined contribution (DC) plan, (b) allow a 529 account to designate an unborn child as a beneficiary of the account, (c) eliminate a provision in the Family Savings Act that would have required a study of the Pension Benefit Guaranty Corporation’s single employer insurance program, and (d) exempt the bill from certain “pay-go” rules that otherwise could apply in the absence of revenue offsets.

According to the Joint Committee on Taxation, the Family Savings Act would reduce tax revenues by $21 billion over 10 years. The three most costly provisions are the new Universal Savings Account, the exemption from the required minimum distribution rules for individuals with an aggregate account balance (among IRAs and DC plans) of $50,000 or less and the open MEP changes.

As noted in my earlier blog, many of the provisions in the Family Savings Act were drawn from the Retirement Enhancement and Savings Act (RESA), a bipartisan Senate bill. It is unlikely that the Senate will take up the entire Tax Reform 2.0 package, or even the Family Savings Act, before the mid-term elections. It is possible, though, that the House and Senate could agree on a retirement package that reflects portions of the Family Savings Act and RESA in the lame duck session. It’s our understanding that preliminary talks between House and Senate staffers are already underway about a potential combination of the Family Savings Act and RESA.

We’ll keep you posted.

Sources:

Ignites, “House passes retirement reform,” Joe Morris, Sept. 28, 2018

NAPA Net, “Retirement component of Tax Reform 2.0 moves to Senate,” Ted Godbout, Sept. 28, 2018

SPARK Institute, “House passes Family Savings Act, which contains SPARK-supported provisions,” Michael L. Hadley, Sept. 27, 2018

PlanSponsor, “Annuity selection safe harbor tacked onto retirement bill,” Rebecca Moore, Sept. 28, 2018 

Important information

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Jon Vogler

Senior Analyst Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.

Prior to joining Invesco in 2008, Mr. Vogler spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.

Mr. Vogler earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He earned a BA degree in history from Rutgers, The State University of New Jersey.

Jon Vogler
Senior Analyst
Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.

Prior to joining Invesco in 2008, Jon spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.

Jon earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He has a B.A. in History from Rutgers, The State University of New Jersey.

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