The government is a week away from a possible shutdown, with lawmakers apparently a long way from an agreement to fund the government until 2023.
And while most observers expect this issue to be resolved one way or another in the coming weeks, the mess appears to be jeopardizing another effort: pension reform legislation long overdue. delayed known informally as SECURE 2.0.
The package, if passed, would make a host of changes to the way Americans save for retirement — from raising the age of required minimum distributions to corporate pressure for more employees to are signing up for plans – and would help deal with a looming retirement crisis for many.
“There was a narrow window for SECURE Act 2.0 to pass, but the window is closing with each passing day,” Brian Gardner, chief policy strategist for Stifel in Washington, told Yahoo Finance.
The latest round of talks this week ended with leaders on Capitol Hill seemingly as far apart as ever. On the one hand, Senate Republican Leader Mitch McConnell (R-KY) accuses Democrats of trying to “hijack the government funding process,” while Senate Majority Leader Chuck Schumer (D -NY), is now openly discussing the possibility of a short. extending the term of government funding, which would likely stall pension reform efforts for the time being.
“Hopefully we don’t go down that road,” Schumer said.
“I think the pressure will start to build for them next week,” Principal Financial Group policy director Lance Schoening said in an interview on Friday. He remains optimistic that the switch is still possible, but notes that his worst-case scenario is an extension of short-term government funding that continues into next year.
“Then I think we’re in a year to multi-year effort to put SECURE 2.0 back in the discussion,” he said.
What the bill would do
The bill aims to follow up on 2019 SECURE Lawwhich represented the first major retirement legislation since 2006. When this bill passed, lawmakers vowed not to wait that long, but saw a roller coaster of ups and downs in their next effort.
The SECURE 2.0 process proved complicated even by Capitol Hill standards with four committees from both sides involved in what became nearly two years of negotiations. It was in May 2021 when a first version of the bill first passed out of the House Ways and Means Committee.
But now lawmakers have largely coalesced behind a series of ideas for the final package and decided the best way forward was to attach it to a government funding bill. But now, “we just need an unrelated task to actually get done so we can roll on it,” Schoening said.
The 2019 SECURE Act was passed using this same strategy, tying into that year’s appropriations bill and signed into law on December 20, 2019 by then-President Donald Trump.
One of the overall goals of the new program would be to get companies to enroll more people in pension plans, with a focus on small businesses that struggle to offer plans or part-time employees in large companies that are not currently eligible to register.
Another key provision would change the age at which people must start receiving mandatory distributions from their private pension plans. The SECURE law has increased the minimum age required for distribution to 72 years old, instead of 70 years old. Lawmakers want to raise it again to 75.
The plan could also change the rules and allow linking student loans and retirement savings or emergency and retirement savings. Either way, lawmakers hope to make it easier for Americans to set aside money for long-term retirement while addressing more pressing financial concerns.
“There are people who have been left out of the retirement savings game,” said Kathleen Coulombe, vice president of the American Council of Life Insurers. recently told Yahoo Finance Live. She represents one of many groups hoping to push the bill across the finish line and added “it is really looking to help a lot of these vulnerable populations.”
Another important step is to encourage employers to automatically enroll new employees in the company pension plan if they are eligible. Studies have shown that employers with self-enrolling pension plans have much higher participation rates.
Other ideas include changes to the SAVERS credit, which allows some low-income workers to get additional tax relief when saving for retirement, and the creation of a “clearing house” for employees to find lost retirement accounts.
What Secure 2.0 would not solve is the social security challenge, which could run out of funds as early as 2034.
The uncertain path ahead
But the fate of the bill is now uncertain as Congress has struggled to agree on measures that do not absolutely need to be passed before the end of the year.
Lawmakers are on the verge of approving another such “mandatory” bill, the National Defense Authorization Act (NDAA), but that effort has removed any measures deemed extraneous. The defenders of reform marijuana banking rulescurbing Big Tech and energy permit reform had planned to join the legislation to the NDAA, but instead almost everything was scrapped.
Gardner said action on retirement may still be possible and “given the bipartisan nature of the bill, there is potential to tie it into an omnibus bill or a tax extensions bill.” , but given the lack of progress on each, the odds of passing the SECURE 2.0 Act are waning.
Congress is due back on Monday to continue trying to get a deal done. Schoening said if lawmakers fail, “we’re going to be on hold to some degree in terms of what we see in the pension system going forward.”
Ben Werschkul is a Washington correspondent for Yahoo Finance.