{"id":9909,"date":"2021-10-14T17:01:54","date_gmt":"2021-10-14T17:01:54","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9909"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"proposed-retirement-plan-changes-in-3-5-trillion-bill","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/proposed-retirement-plan-changes-in-3-5-trillion-bill\/","title":{"rendered":"Proposed Retirement Plan Changes in $3.5 Trillion Bill"},"content":{"rendered":"\n

Angela Krause from Madison,\nWI asks: <\/em>Good Afternoon, Mitch. I understand that the potential $3.5\ntrillion spending bill may include some changes to retirement plans. Could you\nexplain what the changes are? Thank you. <\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thanks for sending in your question, Angela. There are a few\nretirement-focused provisions in the $3.5 trillion budget reconciliation bill,\nso I\u2019ll list them out here. <\/p>\n\n\n\n

But before I do, it\u2019s important that you and readers remember:\nthese are just proposals, <\/em>they are\nnot the law. This spending bill, in particular, faces several challenges before\ngetting passed, and Democrats hold a razor-thin majority in the Senate. The\nbill that ultimately passes may look very different than what is in the bill\ntoday, and some of these retirement provisions could get scrapped or changed.1<\/sup><\/p>\n\n\n\n

The first major retirement provision would require\nbusinesses of basically all sizes to \u2018automatically enroll\u2019 employees in\nretirement plans. The provision applies to businesses at least two years old\nand with five or more employees. It says that these businesses must not only\noffer employees a retirement plan option, they must also enroll them. While at\nfirst glance this provision seems to place a burden on small business owners,\nthe upshot is that businesses would receive a tax credit to offset administrative\ncosts incurred with starting a plan. Businesses that fail to comply would be\ncharged an excise tax. <\/p>\n\n\n\n

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This particular provision is designed to address a problem\nwith retirement plan participation. According to U.S. Census data, 79% of\nAmericans work at a company that offers a retirement plan, but only 41% of them\nparticipate and make contributions. The budget bill provision seeks to not only\nclose that gap but also raise the number of companies offering retirement plans\nto closer to 100%. On the employee side, once enrolled an employee may decide\nto opt-out, and\/or lower or raise their contribution amount as desired.<\/p>\n\n\n\n

A second provision in the bill targets high-income earners\nwith retirement plans having balances over $10 million. The law would alter\ncontribution limits for these earners while also increasing the level of\nrequired minimum distributions for high-income earners, making them withdraw\nmore each year which would generate more tax revenue. Another closely-watched\nand related rule would be to limit the ability of high-income earners to access\nthe \u201cback door Roth IRA,\u201d i.e., the ability to convert traditional IRAs into\nRoth IRAs. <\/p>\n\n\n\n

There are other provisions in the bill that are less\nimpactful, such as allowing tax filers to automatically contribute tax refunds\nto retirement accounts. And there may be more provisions to come. The key for\nyou Angela, and other readers, however, is to wait until this bill arrives at\nPresident Biden\u2019s desk. Only then will we truly know what retirement\nimplications are in the bill \u2013 for now, keep a watchful eye but do not make any\nadjustments to your plan, it\u2019s still too early in the process. <\/p>\n\n\n\n

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Topics include:<\/p>\n\n\n\n