Letting Small Businesses Create Pooled Retirement Plans, Encouraging the Use of New & Existing Savings Accounts (H.R. 6757)
Do you support or oppose this bill?
What is H.R. 6757?
(Updated November 21, 2018)
This bill — the Family Savings Act — would aim to expand opportunities for businesses and workers to participate in retirement plans, and encouraging the use of new and existing tax-preferred savings accounts. A breakdown of its various provisions can be found below.
Savings Accounts
This section of the bill would create a new tax-preferred Universal Savings Account (USA), which would have an individual annual contribution cap of $2,500. Distributions from a USA would only count as taxable income if they were made in the same tax year as that income was contributed, otherwise distributions wouldn’t be penalized. Contributions in excess of the cap would be taxed, while the tax exemption would be eliminated in the event of prohibited transactions.
Section 529 education savings plans would be expanded to allow the distribution of funds for paying apprenticeship fees as part of a registered apprenticeship program, homeschooling expenses, or expenses that are in addition to tuition at elementary or secondary schools. Up to $10,000 in aggregate funds from Section 529 plans could be used to pay principal or interest on student loans, which would count against the individual’s student loan interest deduction if they claimed it.
New and expecting parents (including adoptive parents) would be able to make penalty-free withdrawals of up to $7,500 from retirement accounts within one year of the child’s birth or legal adoption. They would then be able to make contributions to replenish those retirement funds in the future if they want, up to the amount of the withdrawal.
Other provisions of this section would:
Eliminate the maximum age rule for traditional IRA contributions, effective.
Allow employees with an annuity in a 401(k) or similar plan could transfer it to an individual retirement account (IRA) without paying taxes on the transferred amount.
Retirement Plans
This part of the bill would establish multiple employer plans (MEPs) with pooled plan providers, meaning that small businesses from different industries would be able to partner together to establish retirement plans that are less costly and burdensome to administer than a single-employer plan (known as an open MEP). Under current law, only closed MEPs are permitted, so participating employers have to share certain attributes like membership in a trade group or operations in a certain region.
Employees over the age of 70 ½ would be excused from having to take required minimum distributions (RMDs) from qualified retirement plans, such as 401(k)s or individual retirement accounts (IRAs) if assets in their combined retirement accounts is under $50,000.
Argument in favor
This bill would not only make it easier and more cost effective for small businesses to set up retirement plans by pooling together, it’d help American families save for their education, new children, and retirement.
Argument opposed
These changes to employer-sponsored retirement plans and tax-preferred savings accounts would cost the federal government billions in lost tax revenue, further increasing the deficit.
Impact
American workers, particularly those near retirement or with new children; businesses, especially small businesses that’d join MEPs; and the federal government.
Cost of H.R. 6757
The CBO estimates that enacting this bill would reduce federal tax revenue by $21 billion over the 2019-2028 period.
Additional Info
In-Depth: Rep. Mike Kelly (R-PA) introduced this bill as part of the GOP’s Tax Reform 2.0 plan to help Americans save for retirement, their education, and starting families:
“With more than 60 percent of Americans not having enough savings to cover a $1,000 emergency expense, the passage of the Family Savings Act is especially critical. After all, real financial security is not about how much one makes but about how much one saves. With my bill’s provisions, families and workers will have new, much fairer ways to prepare for the future and be able to tackle whatever life may throw their way.”
House Democrats opposed this bill, and the rest of the GOP's Tax Reform 2.0, with House Democratic Whip Steny Hoyer (D-MD) writing:
"Today, Ways and Means Republicans passed out of committee on a party line basis a second round of their dangerous tax scam, which would further bankrupt our children and grandchildren in order to provide even more tax breaks to the wealthiest in our country. Their latest tax legislation would add $3 trillion to the deficit over a decade, even as Republican economic policies - including their first round of tax cuts - led the Congressional Budget Office to project trillion dollar deficits far into the future. Meanwhile, their promised massive economic growth and wage gains for middle class workers have not materialized, with wages still stagnating while businesses use their tax breaks to benefit shareholders through stock buy-backs."
This legislation passed the House Ways and Means Committee on a 21-14 vote and has the support of 29 cosponsors, all of whom are Republicans.
Media:
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Sponsoring Rep. Mike Kelly (R-PA) Press Release
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House Ways and Means Committee Press Release
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House Ways and Means Committee One Pager
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CBO Cost Estimate
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CNBC
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SHRM
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Daily Signal (In Favor)
Summary by Eric Revell
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