House approves retirement reform bill that amends 401(k), IRA rules

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The U.S. House of Representatives on Thursday passed a bill that aims to encourage retirement savings among Americans and strengthen their long-term financial stability.

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Among the provisions called for in the Setting Every Community Up for Retirement Enhancement, or Secure Act, are a couple that will increase the flexibility associated with retirement accounts. Individuals would be allowed to stash money into IRA accounts beyond the current age limit of 70 1/2. It would also delay when individuals are required to begin taking required minimum distributions to 72, from 70 1/2.

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The legislation seeks to make it easier for companies to band together to offer 401(k) plans, while requiring businesses to allow some part-time workers to participate. It would also encourage these plans to offer annuities – or fixed sums typically paid out over a lifetime.

Lawmakers passed the bill with bipartisan support, by a margin of 417 to 3.

The Senate is advancing similar legislation. The Senate bill, however, includes an update to 529 college savings plans – allowing for the withdrawal of as much as $10,000 to help repay student loans. House Republicans criticized Democrats for the removal of a 529 measure that would have allowed funds to be withdrawn to cover other education-related expenses, such as private schooling.

In order to pay for the legislation, House lawmakers are proposing changes to retirement accounts that are passed down. For example, a beneficiary who is not a spouse, would be required to withdraw money within 10 years of inheriting it.

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Major retirement reforms haven’t been enacted in more than a decade. The Senate is expected to take up the bill passed by the House.

The bill would also repeal what is known as the “Kiddie Tax,” which is a tax on a child’s unearned income. This provision would allow taxpayers to retroactively opt not to pay.