In March, with bipartisan agreement, the House passed a bill that is set to increase the starting age for required minimum distributions (RMDs) start and increase the limit on catch-up contributions to qualified employer-sponsored retirement plans, in particular the Thrift Savings Plan (TSP).
To cover this topic again and remind everyone that if the Securing a Strong Retirement Act of 2022 (SECURE Act 2.0 HR 2954) reaches the state of law, it would:
Increase the age at which participants must begin to receive RMDs from retirement plans.
Under present jurisdiction, participants typically must take distributions starting at age 72. This bill will push the age for a number of participants to 73 on January 1st, 2023, increase it to 74 on January 1st, 2030, and raise it again to 75 on January 1st, 2033.
Increase the limits on catch-up contributions
Currently, beginning at age 50, employees are allowed to make additional contributions each year to their 401(k)-type retirement plans (such as the Thrift Savings Plan). For 2021, the catch-up limit for the TSP is $6,500 and is indexed to inflation each year. Under the new bill, those between ages 50 and 61, and those over 65, will stay at that limit. H.R. 2954 would raise the catch-up amount to $10,000 for those age 62, 63, and 64 starting in 2024.
NARFE Supports the Legislation
NARFE wrote in letter to Congress on March 29, “NARFE supports the bill’s age increase for required minimum distributions (RMDs) from retirement plans, including distributions from the Thrift Savings Plan (TSP)”, the letter continued, “As life expectancy has risen, changing the starting age of RMDs from 72 to 75 through a 10-year phased approach is a responsible way to increase the retirement savings of those living on fixed incomes. Retirees should be allowed to keep their funds in the market longer to help extend savings and hedge against the inevitable rise in consumer prices.”
The catch-up contribution components of the bill are also supported by the NARFE. “This increase enables stronger savings for those nearing retirement and allows these individuals to take advantage of compounding interest,” NARFE stated, “The bill also indexes the $10,000 increase to inflation, ensuring that those nearing retirement in the future can take full advantage of the benefit. Indexing is also extended to the $1,000 limit on catch-up contributions to individual retirement accounts (IRAs) for individuals age 50 or older.”
As previously stated in a recent article, it is important to note that this bill has not been signed into law. The House bill has been referred to the Senate where it is expected to develop its own close version for a vote.