Senate Finance Committee Releases the EARN Act

As the smoke continues to clear on retirement plan legislation, a new Act enters the fold from the Senate Finance Committee, serving as a counterpart to SECURE 2.0. First released on June 17, the nearly $40 billion Enhancing American Retirement Now (EARN) Act is a bipartisan effort containing nearly 70 provisions in total. Brian Graff, CEO of the American Retirement Association (ARA), stated “ARA supports the EARN Act which includes a number of provisions to increase retirement plan coverage and make it easier for working Americans to save.”

In addition to some of the key provisions that match, or are very similar to, provisions included in SECURE 2.0, such as enhanced tax credits for the cost of new plans, reform of family attribution rules, and top-heavy relief for excludable employees, other notable provisions of the EARN Act are pulling focus:

  • Newly-established “Starter 401(k) Plans” are an attempt to address the current retirement plan savings gap, and would be effective after 2023
  • A modification of the existing Saver’s Credit into an “Enhanced Saver’s Match” would involve a government matching contribution deposited into a taxpayer’s IRA or retirement plan over the current, which is a credit paid as part of a tax refund, and would be effective for years after 2026
  • As an alternative method for satisfying nondiscrimination testing for 401(k) plans, the “Stretch Match 401(k) Safe Harbor” provision would enroll employees into elective deferral contributions by default, while also making certain mandatory employer contributions, and would be effective after 2023

Additional substantially similar comparisons to SECURE 2.0 legislation passed back in March can be drawn, such as allowing 403(b)s to participate in MEPs and PEPs, allowing for higher catch-up limited after age 60 (under the right conditions), increasing the age for required beginning date for mandatory distributions, establishing a retirement savings lost and found database, etc.

Anticipated over the next number of months is a process of thorough review, potential further adjustments and additions as a result of markups and discussion, and an expected eventual merging of the EARN Act from the Senate Finance Committee and SECURE 2.0 legislation from the House, to come to a final passage.

For further details on the EARN Act’s key provisions, and to view NAPA’s full article, click here.


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