Securing a Strong Retirement Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8696 To increase retirement savings, simplify and clarify retirement plan rules, and for other purposes. IN THE HOUSE OF REPRESENTATIVES OCTOBER 27, 2020 Mr. NEAL (for himself and Mr. BRADY) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Financial Services, and Education and Labor, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the com- mittee concerned A BILL To increase retirement savings, simplify and clarify retirement plan rules, 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; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Securing a Strong Retirement Act of 2020’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 Sec. 1. Short title; table of contents. VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 8696 IH TITLE I—EXPANDING COVERAGE AND INCREASING RETIREMENT SAVINGS Sec. 101. Expanding automatic enrollment in retirement plans. Sec. 102. Modification of credit for small employer pension plan startup costs. Sec. 103. Simplification and increase in Saver’s Credit. Sec. 104. Enhancement of 403(b) plans. Sec. 105. Increase in age for required beginning date for mandatory distribu- tions. Sec. 106. Deferral of tax for certain sales of employer stock to employee stock ownership plan sponsored by S corporation. Sec. 107. Indexing IRA catch-up limit. Sec. 108. Higher catch-up limit to apply at age 60. Sec. 109. Multiple employer 403(b) plans. Sec. 110. Treatment of student loan payments as elective deferrals for purposes of matching contributions. Sec. 111. Application of credit for small employer pension plan startup costs to employers which join an existing plan. Sec. 112. Military spouse retirement plan eligibility credit for small employers. Sec. 113. Small immediate financial incentives for contributing to a plan. Sec. 114. Safe harbor for corrections of employee elective deferral failures. Sec. 115. One-year reduction in period of service requirement for long-term, part-time workers. Sec. 116. Governmental pension plans may include certain firefighters, emer- gency medical technicians, and paramedics. TITLE II—PRESERVATION OF INCOME Sec. 201. Remove required minimum distribution barriers for life annuities. Sec. 202. Qualifying longevity annuity contracts. Sec. 203. Insurance-dedicated exchange-traded funds. TITLE III—SIMPLIFICATION AND CLARIFICATION OF RETIREMENT PLAN RULES Sec. 301. Recovery of retirement plan overpayments. Sec. 302. Reduction in excise tax on certain accumulations in qualified retire- ment plans. Sec. 303. Performance benchmarks for asset allocation funds. Sec. 304. Review and report to the Congress relating to reporting and disclo- sure requirements. Sec. 305. Eliminating unnecessary plan requirements related to unenrolled par- ticipants. Sec. 306. Retirement savings lost and found. Sec. 307. Exemption from required minimum distribution rules for individuals with certain account balances. Sec. 308. Expansion of Employee Plans Compliance Resolution System. Sec. 309. Eliminate the ‘‘first day of the month’’ requirement for governmental section 457(b) plans. Sec. 310. One-time election for qualified charitable distribution to split-interest entity; increase in qualified charitable distribution limitation. Sec. 311. Retirement plan distributions for charitable purpose. Sec. 312. Distributions to firefighters. Sec. 313. Exclusion of certain disability-related first responder retirement pay- ments. VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 8696 IH Sec. 314. Individual retirement plan statute of limitations for excise tax on ex- cess contributions, certain accumulations, and prohibited trans- actions. Sec. 315. Requirement to provide paper statements in certain cases. TITLE IV—TECHNICAL AMENDMENTS Sec. 401. Amendments relating to Setting Every Community Up for Retirement Enhancement Act of 2019. TITLE V—ADMINISTRATIVE PROVISIONS Sec. 501. Provisions relating to plan amendments. TITLE I—EXPANDING COVERAGE 1 AND INCREASING RETIRE- 2 MENT SAVINGS 3 SEC. 101. EXPANDING AUTOMATIC ENROLLMENT IN RE- 4 TIREMENT PLANS. 5 (a) IN GENERAL.—Subpart B of part I of subchapter 6 D of chapter 1 of the Internal Revenue Code of 1986 is 7 amended by inserting after section 414 the following new 8 section: 9 ‘‘SEC. 414A. REQUIREMENTS RELATED TO AUTOMATIC EN- 10 ROLLMENT. 11 ‘‘(a) IN GENERAL.—Except as otherwise provided in 12 this section— 13 ‘‘(1) an arrangement shall not be treated as a 14 qualified cash or deferred arrangement described in 15 section 401(k) or as a qualified salary reduction ar- 16 rangement described in section 408(p) unless such 17 arrangement meets the automatic enrollment re- 18 quirements of subsection (b), and 19 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 8696 IH ‘‘(2) an annuity contract otherwise described in 1 section 403(b)(1) which is purchased under a salary 2 reduction agreement shall not be treated as de- 3 scribed in such section unless such agreement meets 4 the automatic enrollment requirements of subsection 5 (b). 6 ‘‘(b) AUTOMATIC ENROLLMENT REQUIREMENTS.— 7 ‘‘(1) IN GENERAL.—An arrangement or agree- 8 ment meets the requirements of this subsection if 9 such arrangement or agreement is an eligible auto- 10 matic contribution arrangement (as defined in sec- 11 tion 414(w)(3)) which meets the requirements of 12 paragraphs (2) through (4). 13 ‘‘(2) ALLOWANCE OF PERMISSIBLE WITH- 14 DRAWALS.—An eligible automatic contribution ar- 15 rangement meets the requirements of this paragraph 16 if such arrangement allows employees to make per- 17 missible withdrawals (as defined in section 18 414(w)(2)). 19 ‘‘(3) MINIMUM CONTRIBUTION PERCENTAGE.— 20 An eligible automatic contribution arrangement 21 meets the requirements of this paragraph if— 22 ‘‘(A) the uniform percentage of compensa- 23 tion contributed by the participant under such 24 arrangement during the first year of participa- 25 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 8696 IH tion is not less than 3 percent and not more 1 than 10 percent (unless the participant specifi- 2 cally elects not to have such contributions made 3 or to have such contributions made at a dif- 4 ferent percentage), and 5 ‘‘(B) such uniform percentage is increased 6 by 1 percentage point for each year of partici- 7 pation under such arrangement (but not above 8 10 percent) unless the participant specifically 9 elects not to have such contributions made or to 10 have such contributions made at a different 11 percentage. 12 ‘‘(4) INVESTMENT REQUIREMENTS.—An eligible 13 automatic contribution arrangement meets the re- 14 quirements of this paragraph if amounts contributed 15 pursuant to such arrangement, and for which no in- 16 vestment is elected by the participant, are invested 17 consistent with the requirements of section 18 2550.404c–5 of title 29, Code of Federal Regula- 19 tions (or any successor regulations). 20 ‘‘(c) EXCEPTIONS.—For purposes of this section— 21 ‘‘(1) EXCEPTION FOR PLANS OR ARRANGE- 22 MENTS ESTABLISHED BEFORE ENACTMENT OF SEC- 23 TION.—Subsection (a) shall not apply to— 24 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 8696 IH ‘‘(A) any qualified cash or deferred ar- 1 rangement or qualified salary reduction ar- 2 rangement established before the date of the 3 enactment of this section, or 4 ‘‘(B) any annuity contract purchased 5 under a plan established before the date of the 6 enactment of this section. 7 ‘‘(2) EXCEPTION FOR GOVERNMENTAL AND 8 CHURCH PLANS.—Subsection (a) shall not apply to 9 any governmental plan (within the meaning of sec- 10 tion 414(d)) or any church plan (within the meaning 11 of section 414(e)). 12 ‘‘(3) EXCEPTION FOR NEW BUSINESSES.—Sub- 13 section (a) shall not apply to— 14 ‘‘(A) any qualified cash or deferred ar- 15 rangement or qualified salary reduction ar- 16 rangement established while all employers main- 17 taining the plan (and any predecessor employ- 18 ers) have been in existence for less than 3 19 years, or 20 ‘‘(B) any annuity contract purchased 21 under a plan established while all employers 22 maintaining such plan have been in existence 23 for less than 3 years. 24 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 8696 IH ‘‘(4) EXCEPTION FOR SMALL BUSINESSES.— 1 Subsection (a) shall not apply to— 2 ‘‘(A) any qualified cash or deferred ar- 3 rangement or qualified salary reduction ar- 4 rangement if such arrangement is established 5 not later than 1 year after the close of the last 6 taxable year with respect to which all employers 7 maintaining the plan normally employed 10 or 8 fewer employees on a typical business day, or 9 ‘‘(B) any annuity contract purchased 10 under a plan established not later than 1 year 11 after the close of the last taxable year with re- 12 spect to which all employers maintaining such 13 plan normally employed 10 or fewer employees 14 on a typical business day.’’. 15 (b) CLERICAL AMENDMENT.—The table of sections 16 for subpart B of part I of subchapter D of chapter 1 of 17 the Internal Revenue Code of 1986 is amended by insert- 18 ing after the item relating to section 414 the following 19 new item: 20 ‘‘Sec. 414A. Requirements related to automatic enrollment.’’. (c) EFFECTIVE DATE.—The amendments made by 21 this section shall apply to plan years beginning after De- 22 cember 31, 2021. 23 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 8696 IH SEC. 102. MODIFICATION OF CREDIT FOR SMALL EM- 1 PLOYER PENSION PLAN STARTUP COSTS. 2 (a) INCREASE IN CREDIT PERCENTAGE FOR SMALL- 3 ER EMPLOYERS.—Section 45E(e) of the Internal Revenue 4 Code of 1986 is amended by adding at the end the fol- 5 lowing new paragraph: 6 ‘‘(4) INCREASED CREDIT FOR CERTAIN SMALL 7 EMPLOYERS.—In the case of an employer which 8 would be an eligible employer under subsection (c) if 9 section 408(p)(2)(C)(i) was applied by substituting 10 ‘50 employees’ for ‘100 employees’, subsection (a) 11 shall be applied by substituting ‘100 percent’ for ‘50 12 percent’.’’. 13 (b) ADDITIONAL CREDIT FOR EMPLOYER CONTRIBU- 14 TIONS BY CERTAIN SMALL EMPLOYERS.—Section 45E of 15 such Code is amended by adding at the end the following 16 new subsection: 17 ‘‘(f) ADDITIONAL CREDIT FOR EMPLOYER CON- 18 TRIBUTIONS BY CERTAIN ELIGIBLE EMPLOYERS.— 19 ‘‘(1) IN GENERAL.—In the case of an eligible 20 employer, the credit allowed for the taxable year 21 under subsection (a) (determined without regard to 22 this subsection) shall be increased by an amount 23 equal to the applicable percentage of employer con- 24 tributions (other than any elective deferrals (as de- 25 fined in section 402(g)(3))) by the employer to an 26 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 8696 IH eligible employer plan (other than a defined benefit 1 plan (as defined in section 414(j))). 2 ‘‘(2) LIMITATIONS.— 3 ‘‘(A) DOLLAR LIMITATION.—The amount 4 determined under paragraph (1) (before the ap- 5 plication of subparagraph (B)) with respect to 6 any employee of the employer shall not exceed 7 $1,000. 8 ‘‘(B) CREDIT PHASE-IN.—In the case of 9 any eligible employer which had for the pre- 10 ceding taxable year more than 50 employees, 11 the amount determined under paragraph (1) 12 (without regard to this subparagraph) shall be 13 reduced by an amount equal to the product 14 of— 15 ‘‘(i) the amount otherwise so deter- 16 mined under paragraph (1), multiplied by 17 ‘‘(ii) a percentage equal to 2 percent- 18 age points for each employee of the em- 19 ployer for the preceding taxable year in ex- 20 cess of 50 employees. 21 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 22 of this section, the applicable percentage for the tax- 23 able year during which the eligible employer plan is 24 established shall be 100 percent, and for taxable 25 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8696.IH H8696 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 8696 IH years thereafter shall be determined under the fol- 1 lowing table: 2 ‘‘In the case of the following taxable year beginning after the taxable year during which plan is es- tablished: The applicable percentage shall be: 1st ................................................................................................ 100% 2nd ............................................................................................... 75% 3rd ............................................................................................... 50% 4th ................................................................................................ 25% Any taxable year thereafter ......................................................... 0% ‘‘(4) DETERMINATION OF ELIGIBLE EMPLOYER; 3 NUMBER OF EMPLOYEES.—For purposes of this sub- 4 section, whether an employer is an eligible employer 5 and the number of employees of an employer shall 6 be determined under the rules of subsection (c), ex- 7 cept that paragraph (2) thereof shall only apply to 8 the taxable year during which the eligible employer 9 plan to which this section applies is established.’’. 10 (c) DISALLOWANCE OF DEDUCTION.—Section 11 45E(e)(2) of such Code is amended to read as follows: 12 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de- 13 duction shall be allowed— 14 ‘‘(A) for that portion of the qualified start- 15 up costs paid or incurred for the taxable year 16 which is equal to so much of the portion of the 17 credit determined under subsection (a) as is 18 properly allocable to such costs, and 19 ‘‘(B) for that portion of the employer con- 20 tributions by the employer for the taxable year 21 VerDate Sep 11 2014 00:43 Nov 20, 2020 Jkt 019200 PO 00000 F [Text truncated for display. 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