Retirement Security and Savings Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1431 To amend the Internal Revenue Code of 1986 to reform retirement provisions, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 13, 2019 Mr. PORTMAN (for himself and Mr. CARDIN) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to reform retirement provisions, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE, ETC. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Retirement Security and Savings Act of 2019’’. 5 (b) AMENDMENT OF 1986 CODE.—Except as other- 6 wise expressly provided, whenever in this Act an amend- 7 ment or repeal is expressed in terms of an amendment 8 to, or repeal of, a section or other provision, the reference 9 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 1431 IS shall be considered to be made to a section or other provi- 1 sion of the Internal Revenue Code of 1986. 2 (c) TABLE OF CONTENTS.—The table of contents for 3 this Act is as follows: 4 Sec. 1. Short title, etc. TITLE I—EXPANDING COVERAGE AND INCREASING RETIREMENT SAVINGS Sec. 101. Secure deferral arrangements. Sec. 102. Facilitating automatic enrollment. Sec. 103. Credit for employers with respect to modified safe harbor require- ments. Sec. 104. Expansion of saver’s credit. Sec. 105. Qualified cash or deferred arrangements must allow long-term em- ployees working more than 500 but less than 1,000 hours per year to participate. Sec. 106. Separate application of top heavy rules to defined contribution plans covering part-time employees. Sec. 107. 60-day rollover to inherited individual retirement plan of nonspouse beneficiary. Sec. 108. Increase in age for required beginning date for mandatory distribu- tions. Sec. 109. Updating of mortality tables for minimum required distributions. Sec. 110. Increase in credit limitation for small employer pension plan startup costs of certain employers. Sec. 111. Credit for re-enrollment. Sec. 112. Treatment of student loan payments as elective deferrals for purposes of matching contributions. Sec. 113. Treatment of qualified retirement planning services. Sec. 114. Allow additional nonelective contributions to simple plans. Sec. 115. Reform of the minimum participation rule. Sec. 116. Expansion of Employee Plans Compliance Resolution System. Sec. 117. Enhancement of 403(b) plans. Sec. 118. Eligibility for participation in retirement plans. Sec. 119. Small immediate financial incentives for contributing to a plan. Sec. 120. Indexing IRA catch-up limit. Sec. 121. Higher catch-up limit to apply at age 60. TITLE II—PRESERVATION OF INCOME Sec. 201. Qualifying longevity annuity contracts. Sec. 202. Remove required minimum distribution barriers for life annuities. Sec. 203. Eliminating a penalty on partial annuitization. Sec. 204. Insurance-dedicated exchange-traded funds. TITLE III—SIMPLIFICATION AND CLARIFICATION OF RETIREMENT PLAN RULES Sec. 301. Review and report to the Congress relating to reporting and disclo- sure requirements. Sec. 302. Consolidation of defined contribution plan notices. VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 1431 IS Sec. 303. Performance benchmarks for asset allocation funds. Sec. 304. Permit nonspousal beneficiaries to roll assets to plans. Sec. 305. Deferral agreements. Sec. 306. Simplifying 402(f) notices. Sec. 307. Treatment of custodial accounts on termination of section 403(b) plans. Sec. 308. Permit plans to use base pay or rate of pay calculation. Sec. 309. Roth SIMPLE IRAs. Sec. 310. Reduction in excise tax on certain accumulations in qualified retire- ment plans. Sec. 311. Clarification of catch-up contributions with respect to separate lines of business. Sec. 312. Clarification of substantially equal periodic payment rule. Sec. 313. Clarification of treatment of distributions of annuity contracts. Sec. 314. Clarification regarding elective deferrals. Sec. 315. Tax treatment of certain nontrade or business SEP contributions. Sec. 316. Allow certain plan transfers and mergers. Sec. 317. Exception from required distributions where aggregate retirement savings do not exceed $100,000. Sec. 318. Hardship rules for 403(b) plans. Sec. 319. IRA preservation. Sec. 320. Elimination of additional tax on certain distributions. Sec. 321. Distributions to firefighters. Sec. 322. Eliminating unnecessary plan requirements related to unenrolled par- ticipants. TITLE IV—DEFINED BENEFIT PLAN REFORMS Sec. 401. Cash balance. Sec. 402. Aligning use of lookback months to determine interest rates. Sec. 403. Corrections of mortality tables. Sec. 404. Cease double-indexing the variable rate premium. Sec. 405. Enhancing retiree health benefits in pension plans. TITLE V—REFORMING PLAN RULES TO HARMONIZE WITH IRA RULES Sec. 501. Roth plan distribution rules. Sec. 502. Distributions for charitable purposes. Sec. 503. Surviving spouse election to be treated as employee. Sec. 504. Rollovers from Roth IRAs to plans. TITLE VI—ADMINISTRATIVE PROVISIONS Sec. 601. Provisions relating to plan amendments. VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6211 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 1431 IS TITLE I—EXPANDING COVERAGE 1 AND INCREASING RETIRE- 2 MENT SAVINGS 3 SEC. 101. SECURE DEFERRAL ARRANGEMENTS. 4 (a) IN GENERAL.—Subsection (k) of section 401, as 5 amended by Public Law 115–123, is further amended by 6 adding at the end the following new paragraph: 7 ‘‘(15) ALTERNATIVE METHOD FOR SECURE DE- 8 FERRAL ARRANGEMENTS TO MEET NONDISCRIMINA- 9 TION REQUIREMENTS.— 10 ‘‘(A) IN GENERAL.—A secure deferral ar- 11 rangement shall be treated as meeting the re- 12 quirements of paragraph (3)(A)(ii). 13 ‘‘(B) SECURE DEFERRAL ARRANGE- 14 MENT.—For purposes of this paragraph, the 15 term ‘secure deferral arrangement’ means any 16 cash or deferred arrangement which meets the 17 requirements of subparagraphs (C), (D), and 18 (E) of paragraph (13), except as modified by 19 this paragraph. 20 ‘‘(C) QUALIFIED PERCENTAGE.—For pur- 21 poses of this paragraph, with respect to any 22 employee, the term ‘qualified percentage’ 23 means, in lieu of the meaning given such term 24 in paragraph (13)(C)(iii), any percentage deter- 25 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 1431 IS mined under the arrangement if such percent- 1 age is applied uniformly and is— 2 ‘‘(i) at least 6 percent, but not greater 3 than 10 percent, during the period ending 4 on the last day of the first plan year which 5 begins after the date on which the first 6 elective contribution described in para- 7 graph (13)(C)(i) is made with respect to 8 such employee, 9 ‘‘(ii) at least 7 percent during the 10 first plan year following the plan year de- 11 scribed in clause (i), 12 ‘‘(iii) at least 8 percent during the 13 second plan year following the plan year 14 described in clause (i), 15 ‘‘(iv) at least 9 percent during the 16 third plan year following the plan year de- 17 scribed in clause (i), and 18 ‘‘(v) at least 10 percent during any 19 subsequent plan year. 20 ‘‘(D) MATCHING CONTRIBUTIONS.— 21 ‘‘(i) IN GENERAL.—For purposes of 22 this paragraph, an arrangement shall be 23 treated as having met the requirements of 24 paragraph (13)(D)(i) if and only if the em- 25 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 1431 IS ployer makes matching contributions on 1 behalf of each employee who is not a highly 2 compensated employee in an amount equal 3 to the sum of— 4 ‘‘(I) 100 percent of the elective 5 contributions of the employee to the 6 extent such contributions do not ex- 7 ceed 2 percent of compensation, 8 ‘‘(II) 50 percent of so much of 9 such contributions as exceed 2 percent 10 but do not exceed 6 percent of com- 11 pensation, plus 12 ‘‘(III) 20 percent of so much of 13 such contributions as exceed 6 percent 14 but do not exceed 10 percent of com- 15 pensation. 16 ‘‘(ii) APPLICATION OF RULES FOR 17 MATCHING CONTRIBUTIONS.—The rules of 18 clause (ii) of paragraph (12)(B) and 19 clauses (iii) and (iv) of paragraph (13)(D) 20 shall apply for purposes of clause (i), but 21 the rule of clause (iii) of paragraph 22 (12)(B) shall not apply for such purposes. 23 The rate of matching contribution for each 24 incremental deferral must be at least as 25 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 1431 IS high as the rate specified in clause (i), and 1 may be higher, so long as such rate does 2 not increase as an employee’s rate of elec- 3 tive contributions increases.’’. 4 (b) MATCHING CONTRIBUTIONS AND EMPLOYEE 5 CONTRIBUTIONS.—Subsection (m) of section 401 is 6 amended by redesignating paragraph (13) as paragraph 7 (14) and by inserting after paragraph (12) the following 8 new paragraph: 9 ‘‘(13) ALTERNATIVE METHOD FOR SECURE DE- 10 FERRAL ARRANGEMENTS.—A defined contribution 11 plan shall be treated as meeting the requirements of 12 paragraph (2) with respect to matching contribu- 13 tions and employee contributions if the plan— 14 ‘‘(A) is a secure deferral arrangement (as 15 defined in subsection (k)(15)), 16 ‘‘(B) meets the requirements of clauses (ii) 17 and (iii) of paragraph (11)(B), and 18 ‘‘(C) provides that matching contributions 19 on behalf of any employee may not be made 20 with respect to an employee’s contributions or 21 elective deferrals in excess of 10 percent of the 22 employee’s compensation.’’. 23 (c) CONFORMING AMENDMENTS.—Subparagraph 24 (H) of section 416(g)(4) is amended— 25 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 1431 IS (1) in clause (i), by striking ‘‘section 1 401(k)(12) or 401(k)(13)’’ and inserting ‘‘paragraph 2 (12), (13), or (15) of section 401(k)’’, and 3 (2) in clause (ii), by striking ‘‘section 4 401(m)(11) or 401(m)(12)’’ and inserting ‘‘para- 5 graph (11), (12), or (13) of section 401(m)’’. 6 (d) EFFECTIVE DATE.—The amendments made by 7 this section shall apply to plan years beginning after De- 8 cember 31, 2019. 9 SEC. 102. FACILITATING AUTOMATIC ENROLLMENT. 10 The Secretary of the Treasury (or the Secretary’s 11 delegate) shall promulgate regulations or other guidance 12 which— 13 (1) simplifies and clarifies the rules regarding 14 the timing of participant notices required under the 15 Internal Revenue Code of 1986 with respect to an 16 eligible automatic enrollment contribution arrange- 17 ment (within the meaning of section 414(w)(3) of 18 the Internal Revenue Code of 1986) or required 19 under section 336(c)(3) of the Consolidated Appro- 20 priations Act, 2016 with respect to an automatic 21 contribution arrangement (within the meaning of 22 section 336(c)(2) of such Act), with specific applica- 23 tion to— 24 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 1431 IS (A) plans which allow employees to be eli- 1 gible for participation immediately upon begin- 2 ning employment; and 3 (B) employers with multiple payroll and 4 administrative systems; and 5 (2) simplifies and clarifies the application of 6 automatic escalation features under arrangements 7 described in paragraph (1) in the context of employ- 8 ers with multiple payroll and administrative systems. 9 Such regulations or guidance shall address the particular 10 case of employees within the same plan who are subject 11 to different notice timing and different percentage require- 12 ments, and provide assistance for plan sponsors in man- 13 aging such cases. 14 SEC. 103. CREDIT FOR EMPLOYERS WITH RESPECT TO 15 MODIFIED SAFE HARBOR REQUIREMENTS. 16 (a) IN GENERAL.—Subpart D of part IV of sub- 17 chapter A of chapter 1 is amended by adding at the end 18 the following new section: 19 ‘‘SEC. 45T. CREDIT FOR SMALL EMPLOYERS WITH RESPECT 20 TO MODIFIED SAFE HARBOR REQUIREMENTS 21 FOR AUTOMATIC CONTRIBUTION ARRANGE- 22 MENTS. 23 ‘‘(a) GENERAL RULE.—For purposes of section 38, 24 in the case of a small employer, the safe harbor adoption 25 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 10 •S 1431 IS credit determined under this section for any taxable year 1 is the amount equal to the total of the employer’s match- 2 ing contributions under section 401(k)(15)(D) during the 3 taxable year on behalf of employees who are not highly 4 compensated employees. 5 ‘‘(b) LIMITATIONS.— 6 ‘‘(1) LIMITATION WITH RESPECT TO COM- 7 PENSATION.—The credit determined under sub- 8 section (a) with respect to contributions made on be- 9 half of any employee shall not exceed 2 percent of 10 the compensation of such employee for the taxable 11 year. 12 ‘‘(2) LIMITATION WITH RESPECT TO YEARS OF 13 PARTICIPATION.—Credit shall be determined under 14 subsection (a) with respect to contributions made on 15 behalf of any employee only during the first 5 years 16 such employee participates in the qualified automatic 17 contribution arrangement. 18 ‘‘(c) DEFINITIONS.— 19 ‘‘(1) IN GENERAL.—Any term used in this sec- 20 tion which is also used in section 401(k)(15) shall 21 have the same meaning as when used in such sec- 22 tion. 23 VerDate Sep 11 2014 03:59 May 22, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1431.IS S1431 pamtmann on DSKBFK8HB2PROD with BILLS 11 •S 1431 IS ‘‘(2) SMALL EMPLOYER.—The term ‘small em- 1 ployer’ means an eligible employer (as defined in 2 section 408(p)(2)(C)(i)). 3 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 4 shall be allowable under this title for any contribution with 5 respect to which a credit is allowed under this section.’’. 6 (b) CREDIT TO BE PART OF GENERAL BUSINESS 7 CREDIT.—Subsection (b) of section 38 is amended by 8 striking ‘‘plus’’ at the end of paragraph (31), by striking 9 the period at the end of paragraph (32) and inserting ‘‘, 10 plus’’, and by adding at the end the following new para- 11 graph: 12 ‘‘(33) the safe harbor adoption credit deter- 13 mined under section 4 [Text truncated for display. 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