The Secure Act (Setting Every Community Up for Retirement Enhancement Act) was a law that was passed in 2019 with the goal of improving retirement security for Americans. It included provisions such as making it easier for small businesses to offer retirement plans to their employees and allowing long-term, part-time workers to participate in employer-sponsored retirement plans.
Recently, a proposed expansion of the Secure Act known as Secure Act 2.0 was introduced in Congress. This expansion includes additional provisions that aim to further improve retirement security and address other financial issues faced by Americans, such as healthcare and Social Security.
In this post, we'll take a closer look at the key changes in Secure Act 2.0 and explore the potential benefits and drawbacks of these changes.
Key Changes in Secure Act 2.0
Secure Act 2.0 includes several major changes and updates, such as:
- Expanding the multiple employer plan (MEP) provision from the original Secure Act to allow even more small businesses to offer retirement plans to their employees
- Allowing workers to make catch-up contributions to 401(k)s and other workplace retirement plans up to age 75
- Providing a tax credit to employers that offer student loan repayment assistance to their employees
- Increasing the Social Security payroll tax cap to cover 90% of wages, which would help to ensure the long-term solvency of the program
- Creating a new type of retirement plan called the "universal retirement plan," which would be available to all workers, regardless of whether they are employed by a small business or a large corporation
- Establishing a new Medicare option that would allow people to buy into the program at a lower cost than traditional Medicare
These changes have the potential to impact individuals and businesses in a variety of ways. For example:
- The expansion of the MEP provision and the creation of the universal retirement plan may make it easier for small businesses and workers to save for retirement, which could improve financial security for many Americans.
- The increase in the Social Security payroll tax cap is likely to result in higher taxes for some high-income earners, but it would also help to ensure the long-term solvency of the program.
- The new Medicare option may make healthcare more affordable for some people, but it could also lead to increased competition for traditional Medicare.
- The student loan repayment assistance tax credit may help to ease the burden of student loan debt for some workers and may make it more attractive for employers to offer this benefit.
Potential Benefits of Secure Act 2.0
Secure Act 2.0 includes several provisions that have the potential to provide benefits to Americans:
- Improved access to retirement savings: The expansion of the MEP provision and the creation of the universal retirement plan could make it easier for small businesses and workers to save for retirement, which could help to improve financial security for many Americans.
- Support for caregivers: Secure Act 2.0 includes provisions that would allow caregivers to take time off work to care for a family member without fear of losing their job, as well as tax credits to help offset the costs of caregiving.
- Increased access to healthcare: The new Medicare option in Secure Act 2.0 may make healthcare more affordable for some people, which could help to improve access to healthcare for those who are currently uninsured or underinsured.
Potential Drawbacks of Secure Act 2.0
While Secure Act 2.0 has the potential to provide many benefits, there are also some potential drawbacks to consider:
- Increased taxes: The increase in the Social Security payroll tax cap is likely to result in higher taxes for some high-income earners, which could be a drawback for those individuals.
- Unintended consequences: As with any major policy change, there is always the potential for unintended consequences. For example, the new Medicare option could lead to increased competition for traditional Medicare, which could have an impact on the availability and cost of healthcare for those enrolled in traditional Medicare.
- Costs: It is likely that Secure Act 2.0 will come with a cost, either in terms of increased taxes or other expenses. It will be important to consider whether the benefits of the Act outweigh these costs.
Secure Act 2.0 is a proposed expansion of the original Secure Act that includes additional provisions aimed at improving retirement security and addressing other financial issues faced by Americans. While there are many potential benefits to these changes, there are also some potential drawbacks to consider. It will be important to carefully evaluate the Act to ensure that it truly does improve financial security for Americans and that any potential drawbacks are minimized.
For more information about Secure Act 2.0, you may want to check out the following resources:
- SECURE Act 2.0: Later RMDs, 529-to-Roth Rollovers, And Other Tax Planning Opportunities: Secure Act 2.0: Detailed Breakdown Of Key Tax Opportunities (kitces.com)
- The text of Secure Act 2.0: https://www.congress.gov/bill/117th-congress/house-bill/1274
- A summary of Secure Act 2.0 from the House Ways and Means Committee: https://waysandmeans.house.gov/secure-act-2-0/
- An analysis of Secure Act 2.0 from the Congressional Research Service: https://www.congress.gov/116/crpt/hrpt371/CRPT-116hrpt371.pdf
I hope this blog post gives you a better understanding of Secure Act 2.0 and the potential impact it could have on Americans. If you have any additional questions or would like more information, please don't hesitate to ask.