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Retirement Savings Bills Have Momentum on Capitol Hill

By Michael T Townsend

In a bitterly divided Washington, there are few issues on which Republicans and Democrats can find common ground these days. But one issue that has attracted bipartisan support has the potential to be a big win for individual investors: retirement savings.

Bipartisan retirement savings legislation is currently moving through Congress and stands a real chance at becoming law this year. Bills were introduced earlier this spring in both the House of Representatives and the Senate, and while they have numerous overlapping provisions, there are some significant differences that will need to be reconciled. But optimism is high that consensus can be reached on a final bill that boosts retirement savings opportunities.

In the House, the Ways and Means Committee unanimously approved the “Setting Every Community Up for Retirement Enhancement Act,” known as the SECURE Act, in early April. That legislation is expected to be approved by the full House later this month, though timing is always uncertain in the unpredictable political atmosphere of the nation’s capital.

The House bill is notable for a provision that would increase the age at which individuals must begin taking “required minimum distributions” from their retirement accounts to age 72 from age 70 ½. The current rules for required minimum distributions have been in place for more than 15 years, during which time life expectancy has changed and people are working longer. The proposed rule change is intended to reflect those changing societal realities.

The Senate bill, the Retirement Enhancement and Savings Act, or RESA, was introduced in early April. The Senate bill does not include a change in the required minimum distribution age; that is one of the key issues that will need to be reconciled between the two bills.

Both bills would lift the long-standing prohibition on contributions to a traditional Individual Retirement Account (IRA) after the age of 70 ½. It’s an important opportunity for retirees to continue setting aside money for the future.

Here’s an overview of some of the key provisions of the two bills:

Source: House Ways and Means Committee, Senate Finance Committee

Outlook for the legislation

Typically, the two chambers would each pass its own version of the legislation, and then a conference committee of members of the House and Senate would meet to negotiate the details of a final compromise bill. Once the House and Senate pass an identical compromise, the legislation would go to the president to be signed into law.

Reports in Washington are that staff from the House and Senate are hoping to “pre-conference” the legislation by coming to agreement in advance of the Senate vote. If that happens, the Senate would make agreed-upon modifications to the House bill, pass it, and then send it back to the House for a final vote in that chamber.

Leaders in both chambers are hopeful that can be accomplished this summer, before Congress takes its annual August recess.

Individual investors should keep an eye on the bill’s progress in the coming weeks. If a final retirement savings bill is approved by Congress, its provisions would become effective on January 1, 2020.

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