Big changes to the retirement system are included in the end of the year bill from Congress

hidden in the $1.7 trillion public spending bill by 2023 Lawmakers on Tuesday unveiled a series of significant reforms to help Americans save more for retirement.

These range from raising the age for required minimum distributions from retirement plans to putting pressure on companies to enroll more employees in the plans. The bill also includes ideas that can help younger people save more at a younger age.

The measures —which begin on page 2,046 of the massive 4,155 page bill — means that long-overdue retirement reform legislation, known as SECURE 2.0, is now likely on track to become law as soon as this weekend and would begin to address what is becoming a US retirement savings crisis

“Americans deserve decent retirements after decades of hard work, and our bill is an important step forward,” Senate Finance Committee Chairman Ron Wyden (D-OR) said in a statement Tuesday. Wyden was one of many key players behind the bill along with Sen Mike Crapo (R-ID), Rep. Richard Neal (D-MA), Rep. Kevin Brady (R-TX) and others.

“These are reforms that will make a significant difference for workers who have struggled to save,” Wyden added.

People wearing masks to protect against the coronavirus disease (COVID-19) walk past the US Capitol in Washington, U.S., September 4, 2022. REUTERS/Elizabeth Frantz

Visitors to the United States Capitol in Washington in September. (REUTERS/Elizabeth Franz)

Paul Richman of the Insured Retirement Institute adds that “Congress stands ready to help millions more working people and retirees with significant improvements to the nation’s private retirement system. [and] It will add billions to retirement savings for small business workers, part-time workers, employees with student loan debt, military spouses, low-income workers, and others.”

The massive blanket bill is also set to fund the government until 2023 and has a number of other notable measures attached to it, such as a review of how electoral votes are counted during presidential elections Y a TikTok ban on US government devices.

What the bill would do

In a note Tuesday morning, Stifel Washington’s chief policy strategist Brian Gardner explained how “the bill would expand retirement savings options by allowing a deferral of mandatory withdrawals, a larger contribution from update to 401(k) plans and provide new options for small businesses to offer retirement plans to employees.”

The bill is a continuation of the 2019 bill. act SAFEwhich represented the first major retirement legislation since 2006 and has been two years in the making.

WASHINGTON, DC - MARCH 31: (L-R) Committee Chairman Sen. Ron Wyden (D-OR) and Ranking Member Sen. Mike Crapo (R-ID) attend a Senate Finance Committee hearing in Capitol Hill on March 31, 2022 in Washington, DC.  Tai testifies on President Biden's budget request for fiscal year 2023. (Photo by Drew Angerer/Getty Images)

Senate Finance Committee Chairman Sen. Ron Wyden (D-OR) and ranking member Sen. Mike Crapo (R-ID) during a hearing in March. (Drew Angerer/Getty Images)

A general goal of the likely new law is a variety of ways to push companies to get more people to sign up for retirement plans.

One front is new incentives around automatic enrollment in retirement plans. The new rules would encourage employers to automatically include their new employees in the company’s retirement plan as part of the onboarding process. Studies have shown that employers with automatic enrollment retirement plans they have much higher participation rates.

Other areas of focus are making it easier for small businesses, which face barriers to offering plans due to their size, to offer retirement plans. It would also allow more part-time employees to sign up at companies of all sizes.

Another key part of the bill would change the age at which people must begin receiving mandatory distributions from their private retirement plans. The SECURE Act increased the minimum required distribution age from 70 to 72. Now, under the spending bill filed Tuesday, the age requirement would increase again to 73 starting January 1, 2023, and then to 75 by 2033. .

The bill also increases the so-called “catch-up” contributions allowed for savers ages 62 to 64.

(L-R) Mildred Kerrigan, 97, and her son, Kevin Kerrigan, 65, of Westchester, New York, drive a golf cart amid coronavirus-related event cancellations at Brownwood Paddock Square in The Villages, Florida , USA, before the next Democratic election.  elementary school, March 15, 2020. REUTERS/Yana Paskova

(L-R) Mildred Kerrigan, 97, and her son, Kevin Kerrigan, 65, of Westchester, New York, drive a golf cart amid coronavirus-related event cancellations at Brownwood Paddock Square in The Villages, Florida , USA, before the next Democratic election. elementary school, March 15, 2020. REUTERS/Yana Paskova

The plan also has a novel idea of ​​treating student loans as deferments in order to save for retirement. That means student loans and retirement savings could be effectively linked if an employer chooses and offers a plan that allows a worker to save some money for retirement while also addressing more pressing financial problems.

Similar provisions exist that could link retirement and emergency savings in future years.

“There are some people who have been left out of the retirement savings game,” Kathleen Coulombe, vice president of the American Council of Life Insurers. recently told Yahoo Finance Live. She represented one of the many groups hoping the bill would make it to the finish line, adding that it “really seeks to help a lot of these vulnerable populations.”

Other changes include updates to the SAVERS credit, which allows certain low-income workers to get additional tax breaks when they save for retirement, as well as the creation of a “clearinghouse” for employees to find lost retirement accounts.

What the bill will not address is the Social Security challenge, which it could run out of funds as early as 2034. The bill has its critics, with some notes that many of the reforms would be better and more effective if combined with changes to the social safety net program. But lawmakers have long been wary of any changes to Social Security, often called “the third rail of American politics.”

Next steps

Experts are still poring over the provisions, which are hundreds of pages long, but the bill appears to change the retirement landscape for years to come with some provisions taking effect as of January 1, 2023.

The Senate is the first to vote and could vote on the blanket omnibus measure as soon as Wednesday. This step will be the big test for the overall package with at least 10 Senate Republicans needed to join Democrats in passing the effort.

On Tuesday morning, the office of Senate Minority Leader Mitch McConnell sent out a press release offering words of support for the omnibus deal, and making its passage more likely, by saying the omnibus deal “conforms to …conservative policy guidelines”.

If passed in the Senate, the massive spending measure would head to the House of Representatives, followed by President Biden’s desk. The measure has urgency as lawmakers rush to finish it before Friday, both to avoid a government shutdown and to get home for Christmas.

Ben Werschkul is a Washington correspondent for Yahoo Finance.

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