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The U.S. House of Representatives overwhelmingly passed legislation that would expand the tax benefits for retirement accounts to bolster the savings of Americans, many of whom have nothing banked for after they stop working.
The legislation, approved on a 414-5 vote, creates a tax credit of up to $1,000 per employee for small businesses that offer a savings plan. The bill also expands a tax credit for low-income individuals who contribute to their accounts. Workers would automatically be enrolled in retirement plans, with a choice to opt out, rather than requiring employees to proactively sign up.
“Too many workers in this nation reach retirement age without the savings they need,” House Ways and Means Committee Chair Richard Neal said Tuesday on the House floor. “We need to do more to encourage workers to begin planning for retirement earlier. And we need to make saving easier.”
The bill is a rare example of tax measures moving through Congress on a bipartisan basis. The bill now moves to the Senate where it is likely to have strong support as well.
Ending tax-free wealth transfers through the longstanding step-up in basis loophole is among the proposals.
The legislation is intended to help Americans who are nearing retirement age and have little or no savings to begin to accumulate assets. About half — 49% — of adults ages 55 to 66 had no personal retirement savings in 2017, according to the U.S. Census Bureau.
The bill would allow late-career workers to contribute up to $10,000 more to their retirement each year, an increase from the current $5,000 catch-up contribution. However, it requires that those catch-up contributions have taxes subtracted before they go into the account.
It also raises the required age to begin withdrawing money from retirement accounts to 75 from 72. The legislation also allows workers who are paying down student loans to still receive employer-matching contributions in their retirement accounts.
The plan also allows savers to decide whether they want to receive employer-matching contributions on a pre-tax basis, meaning that savers pay taxes on that money when they withdraw it in retirement, or on a Roth basis, meaning those taxes are deducted at the time of the contribution and the money is taken out tax-free later.