While enactment of major retirement legislation in 2025 appears unlikely, there are several bipartisan retirement bills that are expected to be reintroduced. These bills signal a continued commitment to strengthening Americans’ retirement security.
Now that the 119th U.S. Congress is seated, many are asking if we could see another round of major retirement legislation in 2025.
The answer: It’s unlikely.
Republican lawmakers are laser-focused on securing early wins by passing legislation addressing renewal of the Tax Cuts and Jobs Act (TCJA), border security, energy, and defense. These efforts could require two separate legislative efforts spanning most of 2025. As the year progresses, retirement industry experts are staying vigilant for any attempts to limit tax benefits for retirement savings to offset the cost of renewing the TCJA.
We do have some indications of what could form the foundation of another major retirement policy bill. The following bills were all introduced following enactment of SECURE Act 2.0 of 2022, have bipartisan support, and are expected to be reintroduced in 2025:
What: The bill aims to amend the Internal Revenue Code of 1986 to allow transfers from Roth Individual Retirement Accounts (IRAs) to designated Roth accounts within employer-sponsored plans.
Why: This change would allow individuals to consolidate their Roth savings, potentially simplifying retirement planning and streamlining management of retirement savings. This connects with younger savers as 32% of Gen Z earning $75K-$149K have Roth contributions.
Impact: This change could require plan administrators to update their retirement plan to accommodate such rollovers. While 84% % of plans already allow Roth contributions, for those that don’t, adding the feature to the plan might be worth considering.
What: This bill aims to make it easier for employers to select a default investment option for their 401(k) plan that includes guaranteed lifetime income with liquidity restrictions. Fiduciaries must provide certain notice to plan participants or beneficiaries and comply with certain prohibitions on withdrawing the funds.
Why: The intent is to help more workers secure a guaranteed paycheck for life during retirement by having a portion of every 401(k) contribution go towards a guaranteed lifetime product.
Impact: To prepare, plan administrators can begin to reach out to their financial professionals for information about the availability of products that include these components. By ensuring that default investment options like target date funds can include such an element, with liquidity restrictions, more 401(k) savers can potentially experience some of the benefits of pension-like income. This correlates with a recent study showing that 57% of participants want monthly payments that are guaranteed for life when choosing a retirement income plan.
What: The bills aim to amend federal securities laws to allow 403(b) plans to invest in Collective Investment Trusts (CITs). It was just reintroduced this month by a bipartisan coalition of members in both the House and the Senate.
Why: This bill would give nonprofit and public-school employees eligible for a 403(b) plan access to CIT investment options similar to participants of a 401(k) plan.
Impact: Such a change could make 403(b) plans more attractive and beneficial for employees in educational and non-profit organizations. CITs typically have lower fees than mutual funds; such a change could make the investments available in 403(b) plans less expensive for participants. It could also bring parity between 403(b) and 401(k) plans. Plan administrators can prepare by discussing potential CIT investments with their financial professional.
What: This bill would allow an increased start-up tax credit, from $500 to $2,500, for micro-businesses (10 or fewer employees) for the costs of setting up a defined contribution retirement plan.
Why: The tax credits can help offset the costs of setting up and administering a retirement plan, making it more attractive for small businesses to adopt.
Impact: By addressing the access gap employees of small businesses have to a retirement plan, it also can help these small businesses better recruit and retain key employees, which continues to be a top priority for them to stay competitive.
Retirement policy has traditionally been a bipartisan topic with legislators on both sides of the aisle committed to Americans’ long-term retirement security. While the legislative agenda for 2025 seems set for other priorities, we can expect to see retirement-focused bills introduced throughout the year and into the future to try to secure a ride on the next major retirement policy effort.
