Additionally, another provision would require 401(k) plans to provide an annual snapshot of how much income an account holder would have in retirement, based on their current balance. That provision could help workers know whether they’re on track to have enough in retirement.
“That could be a very useful disclosure, provided it’s done well,” Campbell said.
Another proposal in the existing retirement bill would remove the age cap of 70½ for contributions to traditional IRAs.
The measure also would change the rules governing minimum distribution rules when a 401(k) or IRA account holder dies.
Right now, beneficiaries can stretch those RMDs over many years, based on their life expectancy. Under the bill, any balance (or aggregate balance if there’s more than one account) above $450,000 would need to be distributed within five years of the account holder’s death unless the beneficiary is a spouse or meets another qualification.
Aside from possible changes to retirement accounts, the tax legislation also is expected to include other savings proposals, including tax-advantaged universal savings accounts and changes to how 529 education savings plans can be spent.
It also seeks to make the recent tax cuts for individuals and pass-through businesses permanent. Those cuts are set to expire at the end of 2025.
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If any legislation gets approved by the House Ways and Means committee, whether the full chamber would vote on it before the midterm elections is questionable.
“They don’t have a lot of time to decide what will go into any version that gets [considered] by the committee,” Campbell said. “Even if it makes it out of committee, they probably won’t bring it up until at least after the elections.”
If changes do get made to 401(k) plans, it would be the first major congressional modifications since 2006, when the Pension Protection Act was passed.
That measure — which is largely credited for increasing 401(k) participation rates — included provisions that made it easier for companies to automatically enroll workers in their retirement plan and then automatically increase their contribution rate on an annual basis.
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