IRS First Friday Hot Issues Summary - June Edition
Are Declining IRS Audit Rates Providing a Credible Audit Deterrent?

The Senate Now Has a SECURE 2.0

On June 22, the Senate Finance Committee unanimously advanced the bipartisan Enhancing American Retirement Now (EARN) Act that was co-sponsored by Texas Senators John Cornyn and Ted Cruz. This bill will merge with the Senate Health, Education, Labor and Pensions Committee’s retirement bill to form the Senate’s SECURE 2.0 package (an anticipated title) for full Senate consideration.

This legislation has 70 provisions to help more taxpayers save, including:

  • that all employers will automatically enroll employees in 401(k) and 403(b) once they become eligible with an employee contribution of at least 3% for the first year, to increase by 1% up to at least 10% (but not more than 15%) effective after 2023 (unsure if there is an “opt out” option for employees who lack disposable income),
  • increasing the age of mandatory distribution to 75 effective after 2031,
  • a matching-payments credit that would be 50% of an IRA or retirement plan contribution, up to $2,000 per individual,
  • withdrawals for certain family or personal emergency expenses,
  • special use of retirement funds in connection with qualified federally declared disasters,
  • exemption for automatic portability transactions,
  • a higher catch-up limit at age 60 effective after 2023,
  • treatment of student loan payments as elective deferrals for purposes of matching contributions after 2023,
  • exception to early distribution penalty for individuals with terminal illness,
  • directs Treasury to create a new standardized form for the rollover process,
  • allows certain disabled first responders to no longer consider retirement funds at gross income and grants them earlier access,
  • modification of participation requirements for long-term, part-time workers (age 21) effective after 2022,
  • allows workers to take distributions to pay for long-term care premiums, and
  • penalty-free withdrawal (up to $10,000) for victims of domestic abuse with three years to replace the funds.

Several important steps still need to occur. Upon a full Senate vote, which is likely to pass, its SECURE 2.0 would go through the reconciliation process with the House’s SECURE 2.0 Act from March. Congressional leaders will craft a final bill to be voted on by both chambers before it could be signed into law by the president.

Proposed changes to retirement system approved by Senate committee (cnbc.com)

Senate Finance approves retirement tax legislation - KPMG United States (home.kpmg)

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