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Regulation and Compliance > Legislation

Bill to Fix Big Secure 2.0 Drafting Errors Is Coming

By John Manganaro

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Key leaders in the U.S. Congress have confirmed their intentions to introduce technical correction legislation to address erroneous statutory language included in the Setting Every Community Up for Retirement Enhancement (Secure) 2.0 Act.

To this end, the chairs and ranking members of the House Ways and Means Committee and the Senate Finance Committee sent a joint letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, dated May 23.

A copy of the letter was shared Wednesday afternoon with ThinkAdvisor, and it shows congressional leaders have heard and intend to heed the feedback of the retirement industry regarding a number of potentially disruptive drafting errors contained in Secure 2.0.

Among the Secure 2.0 sections flagged for fixes in the letter is Section 603, which is intended to increase pretax “catch-up contributions” for 401(k) plans and individual retirement accounts by 50% for individuals between the ages of 60 and 63.

“Congress did not intend to disallow catch-up contributions nor to modify how the catch-up contribution rules apply to employees who participate in plans of unrelated employers,” the letter states. “Rather, Congress’s intent was to require catch-up contributions for participants whose wages from the employer sponsoring the plan exceeded $145,000 for the preceding year to be made on a Roth basis and to permit other participants to make catch-up contributions on either a pre-tax or a Roth basis.”

Other Secure 2.0 sections the lawmakers plan to amend include Section 107, which is designed to allow Americans to further delay required minimum distributions, and Section 601, which is designed to allow SIMPLE IRA and Simplified Employee Pension (SEP) plans to add Roth features.

As the letter points out, Congress intended to increase the applicable RMD age from age 72 to age 73 for individuals who turn 72 after Dec. 31, 2022, and who turn 73 before Jan. 1, 2033. It also intended increase the applicable age from age 73 to age 75 for individuals who turn 73 after Dec. 31, 2032.

However, with respect to the increase from age 73 to age 75, the provision as passed “could be read to apply such increase to individuals who turn 74 (rather than 73) after December 31, 2032, which is inconsistent with Congressional intent.”

Similarly, Section 601 of seeks to permit SIMPLE IRA plans and SEP plans to include a Roth IRA feature. According to the letter, Section 601 could be read to require contributions to a SIMPLE IRA or SEP plan to be included in determining whether or not an individual has exceeded the contribution limit that applies to contributions to a Roth IRA.

“However, Congress intended to retain the result under the law as it existed before [Secure 2.0] was enacted regarding SIMPLE IRA and SEP contributions, taking into account that section 601 permits SIMPLE IRA and SEP plans to include a Roth IRA,” the letter states. “Thus, Congress intended that no contributions to a SIMPLE IRA or SEP plan (including Roth contributions) be taken into account for purposes of the otherwise applicable Roth IRA contribution limit.”

The letter goes on to state the other errors could still be detected, and these would be included in any forthcoming corrections legislation. The letter does not give a timeframe for the intended introduction or passage of the corrections bill.

Policy experts say the discovery of inadvertent drafting technical mistakes is not uncommon after Congress enacts comprehensive legislation on the scale of the Secure 2.0 Act, and while there is some concern that the current divisions in Congress could make a technical correction more difficult, most experts expect this project will be completed on a timely basis.

(Image: Adobe Stock)

John Manganaro

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