Information Center

Securing a Strong Retirement Act of 2020

01/27/20
Bill

On October 27, 2020 House Ways and Means Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) introduced the Securing a Strong Retirement Act of 2020 (H.R. 8696), a bipartisan bill with some important provisions for retirement plan participants.

The following summary highlights parts of the bill that are likely to be of special interest to retirement plan participants.

Lost and Found (Section 306)

“Lost and Found” would establish an online searchable registry of retirement plans to enable former employees who have lost track of their old employers and their retirement plans to locate those employers and apply for benefits. The registry would be administered by the Pension Benefit Guaranty Corporation (PBGC) which would up-date changes to employer contact information using information already reported on an IRS form.

A second part of “Lost and Found” concerns “forced transfers.”  Plan administrators may transfer small accounts of former employees out of the retirement plan, if such a transfer is permitted by the plan rules.  Occasionally a plan administrator cannot locate a participant in order to transfer the account.

In that case the plan administrator may transfer the account to an IRA in the participant’s name.  “Lost and Found” would require plan administrators to report to the PBGC the name of the participant and where the account was sent so that the participant can later claim the benefit. These ‘missing’ participants would be included in the PBGC’s list of missing participants.

“Lost and Found” would raise the permissible limit for forced transfers to $6000 from $5000.  Very small accounts of $1000 or less would be sent to the PBGC to be claimed later by the participants.

Recoupment: Recovery of Overpayments (Section 301)

If a plan administrator mistakenly pays a retiree an amount greater than the plan rules provide, through calculation errors or otherwise, the plan administrator may seek to recover, or recoup, the overpayment amount.  When the overpayment amount continues for years and interest is added, the amount to be recovered by the plan can be significant. This often produces a hardship for retirees living on fixed incomes. Even small recovery amounts can be burdensome to someone in retirement.

The bill clarify that plans are not required to recover overpayments from retirees who did not know mistakes had been made. If plans choose to recoup, the bill places limits on the recovery of overpayments.  It would limit the number of years used to determine an overpayment amount, forbid charging interest on the overpayment, forbid recovery of an overpayment from an innocent surviving spouse, forbid use of a collection agency to recover overpayments, and require plans to notify retired participants facing a request for payment of their right to appeal. Additionally, traditional retirement plans paying monthly benefits would not be able to reduce a retiree’s benefit amount more than 90 percent of the correct amount to recover an overpayment. Under the bill plans may consider financial hardship when seeking to recover an overpayment.

Paper Benefit Statements (Section 315)

The bill requires at least one annual individual benefit statement on paper for participants in individual account plans (401(k)s), unless a participant has elected to receive benefit statements electronically.  Similarly, the bill requires a paper benefit statement for participants in traditional pension plans unless a participant has elected electronic delivery. Benefit statements must be provided once every three years to participants in traditional pension plans.

Part-time Workers Enrollment Requirement (Section 115)

The bill would reduce the service requirement for long-term part-time workers to participate in a 401(k) plan. The SECURE Act of 2019 required employers with 401(k) plans to include part-time employees who worked for the employer at least three consecutive years of 500 hours or more. This bill would reduce the three-year service requirement to two years.

Changes to Required Minimum Distributions (Sections 105 and 307)

The law requires retirees to begin receiving their retirement benefits by a certain age. This is a mandatory distribution that applies to retirement plans and traditional IRAs (Individual Retirement Accounts). The bill would increase the age limit for required minimum distributions to 75 from 72. (The SECURE Act of 2019 had raised the age for required minimum distributions to 72.)

Additionally, the bill would exempt from a required minimum distribution

those retirees with smaller accounts of $100,000 or less as of December 31 of the year before they reach age 75.  The size of an account is determined by adding retirement savings plan amounts (401(k)s and other individual account plans) and IRA accounts. (Monthly benefits from defined benefit plans are not included in the calculation.)

Saver’s Credit (Section 103)

The bill would simplify and increase the Saver’s Credit. The Saver’s Credit is a tax credit available to individuals within a specified income limit who contribute to an individual account plan, such as a 401(k) or 403(b) plan, or contribute to an IRA. The bill raises the income limit for eligibility and provides a 50 percent tax credit for amounts contributed up to a maximum of $1500 credit per person.

Military Spouse Plan Eligibility (Section 112)

The bill would provide a credit for small employers with defined contribution plans to ease the participation and vesting requirements for military spouses who

make frequent moves and may not be able to meet retirement plan eligibility requirements. To earn the credit, an employer must include the military spouse in the retirement plan within two months of hire and provide immediate full vesting for employer contributions.

The Securing a Strong Retirement Act of 2020 includes a number of additional provisions to expand coverage, including increased credits to encourage small employers to start a retirement savings plan, a requirement that employers with

401(k), 403(b) and SIMPLE plans automatically enroll eligible employees in the plan (with an option to opt-out of plan participation), and permitting employers to make matching contributions for student loan payments.

Here is a House Ways and Means Commitee summary of the bill.

< Back

Sign up to receive updates from us:

Do you want to stay up to date on the latest retirement news and recent happenings at PRC?

Sign up to receive emails from us:

Click here >

Support the Pension Rights Center:

In today’s challenging pension environment, our work is more important than ever. Your contribution will help make it possible for the Center to continue its crucial role as a national consumer organization committed to protecting and promoting retirement security.

Donate >