Key retirement changes to watch for

Between proposals circulating on Capitol Hill and measures expected to be included in the second phase of tax reform the Trump administration says it has begun working on, the government is hoping to encourage Americans to save more cash.

A May report from Northwestern Mutual found that 21% of Americans have no retirement savings at all, while two-thirds of people with a savings account or plan are certain their funds will run dry too soon.

Now lawmakers are looking to help incentivize employers to offer retirement plans, and individuals to take advantage of them.

Here are some of the main proposals currently in the works:

RESA

The bipartisan Retirement Enhancement and Savings Act (RESA) is sponsored by Sens. Orrin Hatch, R-Utah, and Ron Wyden, D-Oregon.

Parts of the bill seek to expand access to Multiple Employer Plans (MEPs), or a retirement plan where multiple businesses can participate. The aim is to potentially lower fees by spreading them across a number of small companies. RESA would get rid of certain requirements that would make it easier for businesses to offer these plans.

RESA includes a proposal that incentivizes businesses to offer plans that automatically enroll employees. It would also provide a tax credit for companies that start up a new savings plan.

For individuals, the bill seeks to encourage savers to think in terms of lifetime savings. It would make it easier for employers to offer annuities – an insurance product that offers a lifelong stream of income.

Tax Reform 2.0

President Donald Trump is meeting with Republican lawmakers this week to begin work on the second tax package, which he said will be done this fall.

Among the provisions that will be included in the new tax package are measures designed to help Americans save more for retirement.

“We are looking at ways where it’s easier for families to save earlier in life and more over time, whether it’s for health care or for retirement,” Brady said during an interview with FOX Business earlier this year. “We think America is not a nation of savers; we want it to be.”

Brady did not go into specific details as to what Republicans plan to do to help more Americans stash away a larger percentage of their income, but Rep. Kenny Marchant, R-Texas, told The Wall Street Journal that a universal savings account could be included. Contributions into a universal savings account would be taxed, but earnings would grow tax-free and would be easier to withdraw than a traditional 401(k) or other retirement account.

Further, the bill could aim to make it easier to use Health Savings Accounts (HSA), an account where an individual contributes pre-tax dollars for the explicit purpose of spending those funds on future medical expenses.

Some provisions of the RESA bill could also be picked up by the GOP for “Tax Reform 2.0,” the Journal reported.