House Swiftly Passes Key Tax Benefits For Retirement Accounts. Here’s How It Works

The House of Representatives passed a bipartisan bill Monday providing massive tax benefits for American workers’ retirement savings accounts.

The Securing a Strong Retirement Act, H.R. 2954, more commonly known as the Secure Act 2.0, was approved on a 414-5 vote with strong bipartisan support. The bill aims to create a $1,000 tax credit for workers at small businesses that offer savings plans, allowing employees to be automatically enrolled in retirement plans rather than requiring them to sign up individually.

“H.R. 2954 will help all Americans successfully save for a secure retirement by expanding coverage and increasing retirement savings, simplifying the current retirement system, and protecting Americans and their retirement accounts,” House Ways and Means Committee Chairman Richard Neal, who sponsored the bill, said on the House floor Tuesday. “Too many workers reach retirement age without having the savings they need.”

“We need to do more to encourage workers to begin planning for retirement earlier,” Neal said. “And we need to make saving easier.”

The bill also aims to help Americans who are approaching retirement but have not actively contributed to their savings accounts. Roughly half of adults between the ages of 55 and 66 did not have any form of retirement savings in 2017, according to data from the U.S. Census Bureau.

“Our bill, SECURE 2.0 improves workers’ long-term financial wellbeing, by helping more Americans save for retirement at every stage of their life,” Republican Leader on the House Ways and Means Committee Kevin Brady said on the House floor Tuesday. “By providing flexibility, for example, we make it easier for local businesses to tailor retirement plans to best fit the needs of their workers.”

“These reforms help Americans not only save earlier in their careers, but it helps families save longer, as well,” Brady added.

Other provisions allow workers who began their careers later in life to contribute up to $10,000 in their retirement accounts each year, but require those savings to be taxed before entering the account. The legislation would also increase the necessary age for required minimum distributions from 72 to 75.

If the legislation is enacted, workers still paying off student loan debt will also receive matching contributions from their employers.