Last month the House passed — with bipartisan support — legislation that would increase the age at which required minimum distributions (RMDs) start and increase the limit on catch-up contributions to qualified employer-sponsored retirement plans, such as the Thrift Savings Plan (TSP).
If the Securing a Strong Retirement Act of 2022 (SECURE Act 2.0 HR 2954) becomes law, it would:
Increase the age at which participants must begin to receive RMDs from retirement plans.
Under current law, participants generally must take distributions starting at age 72. The bill would raise the age for some participants to 73 on January 1, 2023, increase it to 74 on January 1, 2030, and raise it again to 75 on January 1, 2033.
Increase the limits on catch-up contributions
Under current law, starting at age 50, employees can make additional contributions each year to their 401(k)-type retirement plans (such as the Thrift Savings Plan). For 2021, the catch-up limit for the TSP is $6,500 and is indexed to inflation each year. Under the bill, those between ages 50 and 61, and those over 65, will remain at that limit. H.R. 2954 would raise the catch-up amount to $10,000 for those age 62, 63, and 64 starting in 2024.
NARFE Supports the Legislation
“NARFE supports the bill’s age increase for required minimum distributions (RMDs) from retirement plans, including distributions from the Thrift Savings Plan (TSP), NARFE wrote in letter to Congress on March 29. “As life expectancy has risen, changing the starting age of RMDs from 72 to 75 through a 10-year phased approach is a responsible way to increase the retirement savings of those living on fixed incomes. Retirees should be allowed to keep their funds in the market longer to help extend savings and hedge against the inevitable rise in consumer prices.”
NARFE also supports the catch-up contribution components of the bill. “This increase enables stronger savings for those nearing
retirement and allows these individuals to take advantage of compounding interest,” NARFE wrote. “The bill also indexes the $10,000 increase to inflation, ensuring that those nearing retirement in the future can take full advantage of the benefit. Indexing is also extended to the $1,000 limit on catch-up contributions to individual retirement accounts (IRAs) for individuals age 50 or older.”
It is important to note that this bill has not been signed into law. The House bill has been referred to the Senate where it is expected to provide its own similar version for a vote.