Legislative updates

May 10, 2022 – Senator Tommy Tuberville (R-AL) has introduced the Financial Freedom Act, legislation aimed at prohibiting the Department of Labor (DOL) from restricting the types of investments that plan participants can choose through participant directed accounts and self-directed brokerage accounts. The bill is in response to regulatory guidance released by the DOL and announced in March.

May 3, 2022 - Senators Maggie Hassan (D-NH) and Susan Collins (R-ME) have introduced S. 4103, the Helping Parents Save for College Act. The bill would provide low- and middle-income parents with a tax credit for contributions to 529 education savings accounts by expanding the Saver’s Credit. The credit would be worth up to 50 percent of 529 account contributions, with a maximum credit of $2,000 for low-and-middle income families.

Additionally, the proposal would allow plan beneficiaries to move excess funds from the 529 account to a Roth IRA without penalty, so long as the account was maintained for a 10-year period at the time of the distribution. This would alleviate concerns of adverse tax consequences if funds are not used for college. The amount eligible for rollover to a Roth IRA is limited to the lesser of the annual Roth contribution limit or the aggregate amount contributed to the program before the five-year period ending on the date of the distribution.

Senators Patty Murray (D-WA), Tina Smith (D-MN), and Tammy Baldwin (D-WI) reintroduced the Information Needed for Financial Options Risk Mitigation (INFORM) Act of 2022. The proposal would require pension plan sponsors to provide retirees and participants with certain information when being offered a lump-sum buyout from their defined benefit plan.

Representatives Ami Bera (D-CA) and Jason Smith (R-MO) have reintroduced the “Health Savings for Seniors Act” (H.R. 3796) to permit those enrolled in Medicare to contribute to a health savings account (HSA). Pursuant to the Internal Revenue Code (the Code), an individual is eligible to contribute to an HSA if, among other things, the individual is not a participant in Medicare. The Act would amend the Code to remove this restriction if the individual is enrolled in a Medicare plan that has an annual deductible of $1,000 for self-only coverage and $2,000 for family coverage and the annual deductible plus the annual out-of-pocket expenses does not exceed $5,000 for self-only coverage and $10,000 for family coverage. The Act would also amend the Code to prohibit use of HSA funds to pay for Medicare premiums and any Medicare enrollee would be allowed to spend HSA funds only on medical expenses. Currently, individuals with an HSA account are able to spend the HSA contributions for any purpose, including medical expenses, once the individual turns 65, regardless of Medicare enrollment.

Senators Catherine Cortez Masto (D-NV) and John Cornyn (R-TX) have introduced the Savings Access for Escaping and Rebuilding Act of 2022 (SAFER Act). The bill would provide for penalty-free distributions up to the lesser of $10,000 or 50 percent of the nonforfeitable account balance from tax-exempt retirement plans for survivors of domestic abuse. Eligible distributions can be made within a one-year period of the domestic abuse and can be self-certified by the plan participant. The withdrawn funds could be replaced over a three-year period from the date the distribution was received.

The U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (SSRA) by a 414-5 vote on March 29, 2022. H.R. 2954 (also commonly referred to as “SECURE 2.0”) contains over 50 retirement plan provisions—nearly double the number as the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The U.S. Senate is expected to take up a similar bipartisan bill later this year, which could result in the need for a conference committee to reconcile differences between the two bills.

The House Committee on Education and Labor approved by a 29-21 party line vote to release the Protecting America’s Retirement Security Act without amendments to the House floor for consideration. The bill contains the following retirement plan proposals.

• Requires the Department of Labor, within two years of enactment, to explore how disclosure requirements for participant directed individual account plans can be improved to enhance participants’ understanding of fees and expenses and their cumulative effect on savings over time
• Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to require spousal consent and notarization for all distributions, with certain exceptions
• Amends ERISA and the Internal Revenue Code to require eligible employees who are not participating in the plan to be re-enrolled at least every 3 years for any automatic contribution arrangement that becomes effective after December 31, 2024

The House has passed the Affordable Insulin Now Act (the “Act”) to limit the cost of insulin to either $35 or 25 percent of the plan’s negotiated price, whichever is less. Group health plans or health insurance issuers of group or individual insurance would be required to implement the coverage of insulin products beginning January 1, 2023. In addition, the Act caps the cost-sharing limit under Medicare to $35 in 2023, even if the individual has reached the annual out-of-pocket limit and to $35 in 2024 for those who have not yet reached their annual out-of-pocket limit. The legislation must still pass the Senate before it is enacted.

Representative Peter Sessions introduced the Health Care Equality and Modernization Act of 2022 (the “Act”) in the House of Representatives. The Act contains various provisions that would amend the Affordable Care Act (ACA), redefine individual health coverage HRAs (“ICHRAs”), limit premium tax credits, and improve health savings accounts (HSAs).

The Act would repeal the ACA employer mandate and related information reporting, limit consumer protections, and impose a 20 percent penalty assessed as a premium increase for any individual that does not have continuous health insurance coverage for a period of 12 months. The Act would redefine ICHRAs to no longer treat them as group health plans pursuant to the ACA, ERISA, or the IRC. In addition, the Act would not require ICHRAs to comply with various federal laws, including ERISA, the IRC, the ACA, COBRA, and HIPAA. The Act would also limit premium tax credits to those individuals in states that have expanded the Exchange to all areas. Premium tax credits may also be used, at the discretion of the individual, to fund an HSA. Related to HSAs, the Act would increase the individual contribution limit to $5,000 and the family limit based on the number of individuals enrolled in family coverage. Upon the death of the account holder, the Act would also permit for easier transfer by treating the surviving spouse as the named account holder.

Representative Lucy McBath (D-GA) and five other Democratic co-sponsors have introduced the Protecting America’s Retirement Security Act in the House of Representatives. The bill proposes fee disclosure improvements, increasing spousal protections, and automatic reenrollment for defined contributions plans. Additionally, the bill would direct the creation of a personal finance education portal as well as a rainy-day refund savings program that would allow taxpayers to elect deferment of 20 percent of their tax refund to an interest-bearing account that would be available for distribution at a later date.