Bipartisan House Bill Would Increase Required Minimum Distribution Age to 75

Bipartisan legislation in the House was introduced Tuesday which would — among other provisions — increase the required minimum distribution (RMD) from retirement plans to age 75.

Under current law, participants are generally required to begin taking  distributions from their retirement plans at age 72.  The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 generally increased the required minimum distribution age to 72 from age 70.5. The proposed legislation would further increase the RMD age to 75.

The new legislation— the Securing a Strong Retirement Act — was introduced by Ways and Means Committee Chairman Richard E. Neal (D-MA) and Ranking Member Kevin Brady (R-TX).

“COVID-19 has only exacerbated our nation’s existing retirement crisis, further compromising Americans’ long-term financial security,” said Neal. “In addition to meeting workers’ and families’ most pressing, immediate needs, we must also take steps to ensure their well being further down the road. With the Securing a Strong Retirement Act, Ranking Member Brady and I build on the landmark provisions in the SECURE Act and enable more workers to begin saving earlier – and saving more – for their futures. This bill will help Americans approach old age with the confidence and dignity they deserve after decades of hard work and sacrifice.”

“Ensuring Americans have the resources they need for a prosperous retirement is a bipartisan priority – and I’m glad that Chairman Neal and I were able to come together again to build on our work from the SECURE Act,” Brady said. “Our legislation will make it easier for folks to save, protect Americans’ retirement accounts, and give workers more peace of mind as they plan for the future.”

• SEE ALSO:  For the latest information on the Thrift Savings Plan’s current RMD rules, download this PDF from the TSP.gov website.

In addition to a change in the RMD age, the proposed legislation would also make these changes:

Indexing IRA catch-up limit

Under current law, the limit on IRA contributions is increased by $1,000 (not indexed) for individuals who have attained age 50. The legislation would index such limit starting in 2022.

Higher catch-up contribution to apply at age 60.

Under current law, employees who have attained age 50 are permitted to make catch-up contributions under a retirement plan in excess of the otherwise applicable limits. The limit on catch-up contributions for 2020 is $6,500, except in the case of SIMPLE plans for which the limit is $3,000.

The legislation would increase these limits to $10,000 and $5,000 (both indexed), respectively, for individuals who have attained age 60. Individuals who have attained age 60 have a shorter time to save for retirement, making a higher limit appropriate.

There are several other provisions in the Securing a Strong Retirement Act of 2020, including:

• Promote savings earlier for retirement by enrolling employees automatically in their company’s 401(k) plan, when a new plan is created;

• Create a new financial incentive for small businesses to offer retirement plans;

• Increase and modernize the existing federal tax credit for contributions to a retirement plan or IRA (the Saver’s Credit);

• Expand retirement savings options for non-profit employees by allowing groups of non-profits to join together to offer retirement plans to their employees;

• Offer individuals 60 and older more flexibility to set aside savings as they approach retirement;

• Allow individuals to pay down a student loan instead of contributing to a 401(k) plan and still receive an employer match in their retirement plan;

• Make it easier for military spouses who change jobs frequently to save for retirement;

• Allow individuals more flexibility to make gifts to charity through their IRAs;

• Allow taxpayers to avoid harsh penalties for inadvertent errors managing an IRA that can lead to a loss of retirement savings;

• Protect retirees who unknowingly receive retirement plan overpayments; and

• Make it easier for employees to find lost retirement accounts by creating a national, online, database of lost accounts.

A section-by-section summary of the bill can be found here.

Full text of the legislation is available here.