Overhaul of Employer Based Retirement Plans

On May 5, the House Ways and Means Committee unanimously passed the Securing a Strong Retirement Act of 2021. The bill has considerable bipartisan support, so it is expected to pass in the house. The bill builds on the SECURE Act, which seeks to provide wider access to retirement savings for Americans. Most of the proposed legislation would not go into effect until after December 31, 2022, however some provisions would be effective as of December 31, 2021.


The following is a summary of what will likely affect retirement plan sponsors.


  • Sponsors are required to enroll employees in 401(k) and 403(b) plans unless they specifically opt out

  • Several changes to Required Minimum Distribution (RMD) rules:

    • Raises the RMD age from 72 to 75 over a period of 10 years

    • Reduces the individual tax penalty for failure to take RMD

    • Provides more flexibility in the allowable timing, amounts and features of life annuities to satisfy RMD requirements

    • Expands the amount that can be excluded from RMD rules if used to purchase qualified longevity annuity contracts

  • Sponsors are given greater flexibility in adjusting plan issues

  • Connects the IRA catch-up contribution limit directly to inflation

  • Creates new, higher catch-up contribution limits that apply at ages 62, 63, and 64 for those who participate in sponsored retirement plans

  • Gives employees the option to pay student loans instead, but still receive a match from their employer towards retirement.

  • Limits the degree to which plans may seek to recoup excess retirement plans payments from participants

  • Departments of Labor must issue new guidelines for benchmarking of target date funds

  • Sponsors will be required to offer a 401(k) plan to part time employees who work at least 500 hours a year for two straight years, instead of the current three years currently in use

  • Limits the disclosures required to those not participating in plans

  • Paper account statements must be provided at least once a year by sponsors

  • Small Financial incentives may be offered for joining a sponsored retirement plan