Eleven months into 2019, lawmakers have done very little to dispel the label of a “do-nothing Congress.”
Democrats in the House have focused on far-left, progressive policies and are now obsessed with impeaching President Trump. Meanwhile, Senate Republicans have had their hands full successfully confirming executive nominations in the face of unprecedented obstruction from Democrats.
Despite this, lawmakers have a chance to take up and pass commonsense, bipartisan legislation in the form of the Setting Every Community Up for Retirement Enhancement Act. The SECURE Act improves retirement savings for American workers and small businesses.
Chances are, if you work for a large employer, you are covered by a 401(k) plan that allows you to easily save for your retirement. Your employer makes it easy by having your pre-tax deduction automatically go to your account and provides a wide array of investment alternatives. You may even have a matching contribution paid by your employer.
Over time, because of the compounding of interest, you can really build up that account. For example, according to the Internal Revenue Service, saving $200 per month for 20 years will result in $92,870 in retirement savings (assuming a 6% return). Also, because the savings are done through your employer on a pre-tax basis, you don’t pay tax on that money or the earnings.
However, not all workers are lucky enough to have access to workplace savings plans. Almost 5 million employers currently do not offer a retirement plan. That means that more than 28 million full-time workers and 15.5 million part-time workers do not have access to workplace savings until they retire.
Small businesses want to offer retirement coverage, but these plans can be complex to run and may be too much hassle for small employers who are busy running their business. That’s where the SECURE Act comes in.
The bill contains numerous reforms that will assist small businesses in helping their employees save for retirement. In addition, it gives workers greater flexibility to save and older workers and retirees more control over their savings.
The law will make it easier to set up multiple-employer plans, which are commonly used by small businesses and independent workers as a pathway for retirement savings. These plans help employers offer workplace savings plans to their employees by removing many administrative hassles that have prevented small employers from offering their own independent plans.
The SECURE Act further encourages small employers to set up retirement plans by increasing the employer tax credit for starting a new retirement plan from $500 to $5,000. And that’s not all.
The bill would require employers to include long-time, part-time workers in 401(k) plans, and new parents would be able to withdraw from an Individual Retirement Account or 401(k) penalty-free. It also helps older workers by repealing the maximum age for contributions to an IRA and increasing the age when you are required to take a distribution from a retirement account.
To be clear, the SECURE Act is not perfect.
Despite unanimously passing the House Ways and Means Committee, Speaker of the House Nancy Pelosi removed a provision to expand 529 Education Savings Accounts in order to appease teachers’ unions and liberals who oppose homeschooling. This provision should be passed into law just like the rest of the SECURE Act.
There are also other improvements to retirement savings that could be made, such as the reforms found in Sen. Rob Portman’s Retirement Security and Savings Act. However, none of these are reasons not to pass the SECURE Act.
Passage of this legislation will strengthen retirement savings and offers an opportunity for lawmakers to help workers, families, and small businesses.
Alexander Hendrie is the director of policy at Americans for Tax Reform, a Washington, D.C.-based advocacy group dedicated to fighting for lower taxes and limited government.
