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House passes small-business retirement savings legislation

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House passes small-business retirement savings legislation

Doug Sword is a reporter with CQ-Roll Call. Reprinted by permission from CQ Roll Call.

The House easily passed a wide-ranging retirement savings bill on a 417-3 vote, sending the measure to the Senate where it is expected to receive swift attention.

The bill would provide tax credits and remove barriers for small businesses to offer retirement plans to their workers and boost the minimum age for required distributions from savings plans from 70.5 to 72 years of age, among other provisions.

It would also expand the uses of 529 education savings accounts, including for qualified apprenticeship programs and paying off student loans. It would also repeal a 2017 tax law provision that inadvertently raised taxes on income earned by children, including military survivor benefits when a parent is killed in action. The "kiddie tax" fix would cost $512 million over a decade, the Joint Committee on Taxation reported May 22.

In all, there are more than two dozen provisions in the legislation, which along with a related bill in the Senate, have been at least three Congresses in the making.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, has called moving the legislation this year a "top priority." Last week, Grassley said he expected to soon receive the House bill and that his committee would work "to reconcile the differences and get this important bill to the president."

House Ways and Means Chairman Richard Neal called the legislation the "most substantive promotion of retirement savings" in more than a decade.

"One of my priorities since becoming chairman of the Ways and Means Committee has been helping American workers of all ages prepare for a financially secure retirement," Neal, D-Mass., said as debate began on the House floor on May 23.

The only three 'no' votes came from Republicans: Justin Amash of Michigan, Thomas Massie of Kentucky and Chip Roy of Texas.

Neal has promised that more retirement savings legislation will follow. That will include legislation to help retirees in troubled multiemployer pension plans, which face steep cash shortfalls, and a measure to require businesses to automatically enroll their workers in savings plans unless they opt out.

On May 21, Republicans made a show of voting against the bill's closed rule, complaining about Democrats' unilateral move to remove a part of the 529 provision that would have allowed tax-free dollars to be used to pay homeschooling and certain K-12 expenses, including at private and religious schools.

The rule passed on a strictly party-line vote, but the protest largely ended after that. Rep. Mike Kelly, R-Pa., the prime sponsor of a predecessor bill in the last Congress, said the removal of the homeschooling feature would not dampen his support.

And House Ways and Means ranking member Kevin Brady, who had expressed opposition to the Democrats' move, acknowledged he would vote for a bill that represented "years of hard work" by both Republicans and Democrats.

"The time is right for these reforms," Brady, R-Texas, said shortly before the vote. The bipartisan measure is supported by "members of the Progressive Caucus and Freedom Caucus" along with a range of other House factions, he said.

Brady did allege that teachers' unions "forced changes perhaps for no good reason at the 11th hour" regarding the 529 account changes.

The total cost of the legislation over 10 years is $16.8 billion, according to an estimate released by the Joint Committee on Taxation on Wednesday. That includes a $3.4 billion expansion of joint tax-favored retirement plans to groups of employers in different industries and $8.9 billion for raising the minimum age to 72 for minimum distributions.

The biggest offset, $15.7 billion, comes from requiring wealthy inheritors of IRAs to withdraw all plan assets, which would be taxable, within 10 years. That is different from the Senate version, which would generally require such distributions within five years, but with an exemption for plans with balances limited to $400,000.

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