WASHINGTON, DC – In an effort to help more Americans increase retirement savings and broaden access to workplace retirement plans, Congress approved comprehensive retirement savings reform in the FY 2023 omnibus appropriations bill, which was signed into law yesterday. 

U.S. Senator Jack Reed, a senior member of the Appropriations Committee and supporter of the bipartisan provision, says it will help strengthen the retirement readiness and security of millions of hardworking Americans and benefit workers regardless of where they are in the retirement savings process.

Based on the bipartisan SECURE 2.0 bill, led by U.S. Senators Ben Cardin (D-MD) and Rob Portman (R-OH), the measure makes significant improvements to the nation’s private retirement system by expanding retirement savings options; targeting savings incentives to workers who need them most; and providing more certainty and flexibility for Americans during their retirement years.  It also allows employers to offer student debt relief through workplace retirement plans.

“This is a significant win for workers, employers, and taxpayers.  It provides workers with more certainty, flexibility, and security when it comes to their retirement savings and makes it easier for small businesses to set up retirement plans for their employees,” said Senator Reed.  “Every American should have the opportunity to build a nest egg so they can retire with dignity and financial security.  This legislation puts more Americans on a pathway to a secure retirement and cuts red tape for employers.  It will strengthen our workforce and help families save and that leads to a stronger, more resilient economy for all Americans.”


Reed highlighted several key beneficial provisions in the bill, including:

INCREASING ACCESS TO RETIREMENT SAVINGS PLAN ENROLLMENT: Uses the power of auto-enrollment to make it mandatory for employers to enroll workers, once they meet eligibility rules, in 401k plans at a minimum rate of 3%.  Employees may opt out or change the rate immediately after being enrolled but, as a default, employers with a corporate plan would need to sign up their employees.

INCREASING TAX INCENTIVES FOR SMALL BUSINESSES TO CREATE RETIREMENT ACCOUNTS FOR THEIR WORKERS: Small businesses are not required to offer 401(k)-type plans to workers.  But those that do will now be eligible to receive a 100% tax credit, up to $5,000, for the administrative costs of starting a retirement plan and up to $1,000 per employee to match the employer’s contributions to 401(k)-type plans.  The matching contribution credit would phase out gradually over five years.  It also would subsidize start-up costs for firms that join multiple-employer plans.

INCENTIZING SAVING & REVISING THE SAVER’S CREDIT FOR LOW- AND MODERATE-INCOME WORKERS: Shifts the current non-refundable tax credit into a more manageable direct matching federal contribution that must be deposited into a taxpayer’s IRA or retirement plan. The match is 50 percent of IRA or retirement plan contributions, up to $2,000 per individual. The match phases out between $41,000 and $71,000 in the case of taxpayers filing a joint return ($20,500 to $35,500 for single taxpayers and married filing separate; $30,750 to $53,250 for head of household filers). The final package also directs the Treasury Department to increase public awareness of the Saver's Match to increase use of the match by low- and moderate-income taxpayers. These workers may not be able to save as much as necessary, but a match allows for increased savings.

ALLOWING HARDSHIP WITHDRAWAL FROM PLANS IN CASE OF AN EMERGENCY OR HEALTH CRISIS: Beginning in 2024, savers would be allowed to take an early “emergency” distribution from their retirement account to cover unforeseeable or immediate financial needs. That emergency distribution of up to $1,000 could only be taken once during the year, but wouldn’t be subject to the usual additional 10 percent tax that applies to early distributions. But: if enrollees choose not to repay the distribution within a certain time, they would be prohibited from taking other emergency distributions for three-years.  The measure also allows for some penalty-free withdrawals for those who are terminally-ill, victims of domestic abuse, as well as for the payment of long-term-care insurance bills. And those struck by federally-declared disasters will also be allowed to withdraw as much as $22,000 from their retirement accounts without facing penalties, and the income tax on the withdrawal can be paid over three years.

SUPPORTING WORKERS PAYING OFF STUDENT LOAN DEBT: Assists employees who may not be able to save for retirement because they are overwhelmed with student debt, and thus are missing out on available matching contributions for retirement plans. The omnibus package allows such employees to receive those matching contributions for repaying their student loans. It permits (but does not require) an employer to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA. Governmental employers also are permitted to make matching contributions in a section 457(b) plan or another plan with respect to such repayments.

PROVIDING ACCESS TO RETIREMENT SAVINGS OPTIONS FOR PART-TIME WORKERS: Current law requires employers to allow long-term, part-time workers to participate in the employers’ 401k plans. It provides that—except in the case of collectively bargained plans—employers maintaining a 401k plan must have a dual eligibility requirement under which an employee must complete either 1 year of service (with the 1,000-hour rule) or 3 consecutive years of service (where the employee completes at least 500 hours of service). SECURE 2.0 reduces the 3-year rule to 2 years, effective for plan years beginning after December 31, 2024.

INCREASING OPPORTUNITY TO MAKE CATCH-UP CONTRIBUTIONS: Older workers would be permitted to expand ‘catch-up’ contributions to their retirement accounts, with anyone aged 60, 61, 62, or 63 allowed to deposit up to $10,000 or more a year.

CREATING A RETIREMENT ACCOUNT “LOST AND FOUND:” Many workers who frequently change jobs can have retirement plans from several employers.  But they often lose track of their accounts when they change jobs or employers lose contact with former workers. New language in the omnibus would create a national searchable database to connect workers with their former plans.

ALLOWING MILITARY SPOUSES TO VEST INTO A PLAN IMMEDIATELY INSTEAD OF WAITING: Military spouses often do not remain employed long enough to become eligible for their employer's retirement plan or to vest in employer contributions. Provisions in the bill would provide small employers a tax credit with respect to their defined contribution plans if they (1) make military spouses immediately eligible for plan participation within two months of hire, (2) upon plan eligibility, make the military spouse eligible for any matching or nonelective contribution that they would have been eligible for otherwise at 2 years of service, and (3) make the military spouse 100 percent immediately vested in all employer contributions. The tax credit equals the sum of (1) $200 per military spouse, and (2) 100 percent of all employer contributions (up to $300) made on behalf of the military spouse, for a maximum tax credit of $500. This credit applies for 3 years with respect to each military spouse and does not apply to highly compensated employees.

The measure was signed into law on Thursday by President Biden as part of the FY 2023 Omnibus Appropriations law.