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The brand new pension regulation provides advantages for senior residents and debtors

The U.S. Capitol in Washington, D.C.

Al Drago / Bloomberg via Getty Images

A new non-partisan pension law offers advantages for seniors and savers who bear the debts of their students.

Legislation, proposed Tuesday by House Legislators, would increase the age at which seniors must withdraw money from their 401 (k) plans and individual retirement accounts to 75 years.

Under current law, savers must make these minimum annual distributions from the age of 72.

The bill, known as the 2020 Strong Retirement Act, would also allow companies to pay a 401 (k) match to workers repaying student loans, even if those borrowers don't save on the company pension plan.

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"The idea is that employees who are overwhelmed with student debt may not realistically be able to save for retirement and therefore miss out on the matching contributions available," a summary of the bill reads.

The legislation was proposed by Rep. Richard Neal, D-Mass., Chairman of the House Ways and Means Committee, and Rep. Kevin Brady, R-Texas, the senior member of that tax writing committee.

The Strong Retirement Act of 2020 follows another law, the Secure Act, which President Donald Trump incorporated into law late last year. Among other things, this law increased the mandatory retirement age from 70½ to 72 years.


The new house bill includes a few more changes to RMDs.

For example, those with savings lower than 401 (k) or IRA (less than $ 100,000) would not have to make distributions.

The bill also increases the donation, which seniors to charity can count towards their annual RMD. Under current law, savers can make such a "qualified charitable distribution" of up to $ 100,000 per year from an IRA. The bill would raise the amount to $ 130,000 per year and allow for those charitable distributions from qualifying retirement plans like a 401 (k).

Under current law, savers over 50 years of age can put more money into their retirement provision than their younger colleagues by making a catch-up contribution. (The catch-up contribution limit in 2020 is $ 6,500.) The home bill would allow people over 60 to contribute more – up to $ 10,000, which would be indexed for inflation.

The far-reaching bill contains several other measures related to retirement, such as: E.g. companies can use financial incentives such as gift cards to encourage workers to save in a 401 (k); Demand for newly established 401 (k) plans to automatically register employees; Increase in tax credit for 401 (k) savers; and creating a sort of "lost and found" office that allows employees to be paired with 401 (k) accounts that they may have accidentally forgotten or left behind.

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