The chairman of the Senate Finance Committee has
reintroduced legislation that seeks to significantly expand the impact of the
Saver’s Credit to help middle-class families save for retirement.
The Encouraging Americans to Save Act (EASA), introduced
July 22 by Chairman Ron Wyden (D-OR), along with six of his Democratic
colleagues, would restructure the existing, nonrefundable Saver’s Credit into a
refundable (meaning you can claim it without having a tax liability against
which to offset it), government matching contribution of up to $1,000 a year
for middle-and-moderate income workers who save through a defined contribution
plan or an IRA.
Introduction of EASA comes as the Committee plans to hold a
hearing on July 28 on how Congress can enhance retirement savings incentives.
Brian Graff, CEO of the American Retirement Association and Executive Director
of NAPA, is scheduled to testify at the hearing.
According to a summary of the legislation, it would boost
the existing Saver’s Credit by making the full 50% credit rate available on the
first $2,000 of savings per year to an IRA, 401(k) plan, 403(b) tax-deferred
annuity, or a section 457(b) governmental plan for individuals with income up
to $32,500 and for couples earning up to $65,000 per year. That would phase out
over the next $10,000 of income for individuals and $20,000 for couples.
The legislation also requires the credit be directly
contributed into the saver’s retirement plan or IRA. It also would be available
for contributions to ABLE Accounts, with the credit deposited in such accounts.
The income limits and the cap on the eligible contribution
amount would be indexed for inflation.
Refundability
Because the credit would be fully refundable, EASA would
help those middle-and-low-income savers within the target income group, as many
of them do not benefit from the current Saver’s Credit because they have no
income tax liability. What’s more, because the government match would be
deposited directly into the taxpayer’s account, the money would be saved rather
than spent.
The Return of myRA?
For individuals who provide erroneous account numbers or who
do not currently have a savings account, the match would be deposited
automatically into a Roth R-bond account, which is similar to the myRA program
that was established by the Obama administration but eliminated by the Trump
administration.
The legislation also includes a COVID-19 recovery bonus
credit that provides up to $5,000 in additional government matching
contributions for the first $10,000 saved during a five-year period beginning
in 2022.
“Low- and middle-income workers, who are far less likely to
have adequate retirement savings, need help,” Wyden said in a statement.
“Addressing our retirement crisis demands a comprehensive approach, and my bill
is an important piece of the puzzle that would deliver meaningful federal
retirement contributions year after year.”
The Chairman further cites data from the National Institute
on Retirement Security showing that more than 100 million working-age Americans
do not have coverage through a pension plan or own any retirement assets,
whether in a DC plan or an IRA.
EASA is cosponsored by Sens. Michael Bennet (D-CO), Bob
Casey (D-PA), Dick Durbin (D-IL), Amy Klobuchar (D-MN), Bob Menendez (D-NJ) and
Patty Murray (D-WA).
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