Senate Finance Committee Advances Retirement Legislation
On June 22, 2022, the Senate Finance Committee voted unanimously to advance the Enhance American Retirement Now (EARN) Act. This bill is aimed at making it easier for Americans to save for retirement as it is estimated that between 40 and 60% of Americans either have no retirement or have not saved enough. The bill has more than 70 proposals after months of collaboration with every member of the committee.
Included in the bill are proposals for; Individual Retirement accounts, Retirees, Public Safety Officers and Military, Nonprofits and Educators, Disaster Relief, and Employer Plans.
Individual Retirement Accounts – There are many proposals listed in this section including allowing an exception to the 10% early distribution penalty for withdrawals for certain emergency expenses. The reason for this proposal is that a vast majority of Americans surveyed would not be able to come up with $1,000 for emergency expenses. This proposal would allow them to withdraw it and repay that distribution over 3 years.
Retirees – One big proposal in this section involves when an employer retirement plan overpays a participant or beneficiary. Under existing tax rules, the plan is required to recover those payments. Under this new proposal, a clarification would be issued that tax-preferred employer plans do not violate the rules if they do not seek repayment.
Public Safety Officers and Military – Military spouses would now be eligible for retirement plans with small employers and those employers would receive a tax credit of $200 per spouse, with an enhanced credit up to $300 per spouse if the employer makes contributions to the plan.
Disaster Relief – Provision allows for up to $22,000 to be distributed from employer retirement plans or IRAs for affected individuals and would not be subject to the 10% additional tax
Employer Plans – A provision in this category would allow a small employer (100 or fewer) that adopts a plan that satisfies the default enrollment requirements and employer matching contributions described in sec. 101 would be eligible for a tax credit.
Many other proposals in the Senate bill can be found by clicking here.
If you have any questions regarding the EARN Act, please contact the professionals at The Center for Financial, Legal, and Tax Planning Inc. at (618) 997-3436 or by visiting our website at www.taxplanning.com.