Proposed Legislation Targets Changes to Retirement Accounts

June was a busy month for lawmakers, with several pieces of new legislation introduced that are designed to enhance retirement savings opportunities for American workers. Below are the highlights of what each piece of legislation would aim to accomplish if passed.

Enhancing Emergency and Retirement Savings Act of 2021
Senators James Lankford (R-Oklahoma) and Michael Bennet (D-Colorado) introduced the Enhancing Emergency and Retirement Savings
Act of 2021 on June 2.
This act would provide retirement account owners some flexibility when they need to cover an emergency expense by providing a penalty-free “emergency personal expense distribution” option from employer-sponsored retirement plans and IRAs. The proposal allows for one emergency distribution per calendar year of up to $1,000 from the individual’s account, with a requirement that the withdrawn funds be paid back to the plan before an additional emergency distribution from that same account is allowed. The amount can be recontributed within a three-year period to any eligible plan to which a rollover contribution can be made.

Keeping Your Retirement Act and Increasing Retirement Amount Act
Sen. John Kennedy (R-Louisiana) introduced two bills that are squarely focused on retirement savings themes. The first, the Keeping Your Retirement Act, introduced on June 7, proposes to raise the RMD age from 72 to 75 for certain retirement accounts. This, according to a press release issued by Kennedy, “would give seniors more time for their retirement savings to grow before they are required to make annual withdrawals that can deplete their savings and increase their tax liability.” It is worth noting that a current bill, the Improving Access to Retirement Act (coined SECURE 2.0) was unanimously passed by the House Ways and Means Committee earlier in 2021. It is expected to be passed into law in the near future and mandates that the RMD age be raised to 75.

The second, called the Increasing Retirement Amount Act, also introduced on June 7, would allow individuals who do not have access to a workplace retirement plan to increase their IRA contributions to $12,000 per year (the current maximum IRA contribution is $6,000 per year). The legislation would allow for an additional $3,000 to be contributed per year for individuals who are at least 50 years old and who do not have a workplace retirement plan, bringing total annual IRA savings for those individuals up to $15,000.

Retirement plan sponsors and administrators should keep a watchful eye on the development of these pieces of legislation, as their passage could affect retirement plan transactions in the future.