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How The EARN Act Could Affect You

David Hicks

It’s looking more and more likely that major retirement-related legislative changes will happen sooner rather than later. 

Recently, the Senate Finance Committee approved the Enhancing American Retirement Now (EARN) Act, which features some similar provisions as the House-approved Securing a Strong Retirement Act (popularly called the SECURE 2.0 Act) that was passed in March 2022.  

The quick action by Senate committees on both the EARN Act and the RISE AND SHINE Act (which we wrote about here) suggests that Congress could indeed be poised to take action on retirement law soon.  

The EARN Act vs. the House’s SECURE 2.0 

There are quite a few similarities between the proposals from the House and the Senate:

  • The starting age for initial required minimum distributions (RMDs) from pre-tax retirement accounts from 72 to 75 
  • The excise tax on missed RMDs would be reduced to 25% from the current 50% 
  • The limit on catch-up contributions for older workers would be increased 
  • Hardship withdrawals of less than $1,000 for financial emergencies would not be subject to the IRS early withdrawal penalty of 10% for those under age 59 ½  
  • Part-time workers would be eligible to participate in employer-sponsored retirement plans if they work at least 500 to 999 hours per year for two consecutive years (down from the current three consecutive year requirement) 
  • Employers would be permitted to make contributions to 401(k) plans on behalf of workers who are repaying student debt instead of contributing to their retirement accounts 

What’s Next? 

Most Capitol Hill watchers are saying that the Senate will combine the provisions from the EARN Act with those from the RISE AND SHINE Act before bringing it to a full vote. 

Once passed by the Senate, the combined bill will need to be reconciled against the House-approved bill before it can be sent to President Biden for his signature to be enacted into law.  

What You Need to Do 

Right now, it’s a waiting game until we know for sure what the Senate’s next step is. 

One of the best things about working with a financial planner is that you get an inside track on the most up-to-date legislative changes that will affect your future.  

If you aren’t working with a planner yet, we invite you to meet with us for a free, no-obligation consultation—just click here. 

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