“If you could afford to pay the tax on the employer match in the Roth today, then that money builds up tax-free for the rest of your life,” she said.
Employer Contributions, Charitable Contributions SECURE 2.0 would also allow an employer contribution to an employee retirement plan based on the employee’s student loan payments. “If you’ve got an employee who’s paying back student loans, the student loan payments can qualify as contributions to the retirement plan only for purposes of the employer match,” she said. “That could be really significant to help (workers) save for retirement while at the same time taking care of debt from college.”
SECURE 2.0 would also allow individuals age 70½ and older to make a one-time charitable distribution, up to $50,000, from an IRA to a split-interest trust such as a charitable remainder trust. “Most of my clients love qualified charitable distributions or QCDs,” she said.
Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity.
The caveat, however, has always been that it has to be a public charity, said Featherngill. “It can’t be your remainder trust or anything else where you have an interest,” she said. But SECURE 2.0 would allow an account owner to give up to $50,000 into a split interest trust, a charitable remainder trust. A charitable remainder trust allows a grantor to create a trust that generates revenue for a few years and then transfers the assets to a charity, according to the Legal Information Institute.
The proposed bill, HR 2954, would also allow domestic abuse survivors to take a distribution of the lesser of $10,000 or 50% of the plan balance without penalty for one year following the abuse. “This gives access to additional funds if somebody needs it,” she said.
Of note, there’s a version of SECURE 2.0, the Retirement Security and Savings Act, in the Senate. That proposed legislation features many provisions included in the House’s Securing a Strong Retirement Act but there are differences as well.
“It will be interesting to see if (the House and Senate) combine these bills,” said Featherngill.
And, of course, any proposed legislation must be signed into law by the President, she noted.
And until then, retirees and would-be retirees should keep an eye on Congress. “Let’s see what happens and then we can plan for next year,” she said.