April 15--Congress has proposed legislation to help Americans sock away more money. Yes, it’s true: Lawmakers might actually do something to help solve our retirement savings pickle.
Wending its way through the House and Senate this month is an epic bill called “The Setting Every Community Up for Retirement Enhancement” (SECURE) Act of 2019. The act is a bit of kitchen-sink legislation, with goodies for current and future retirees, including students. Let’s go through some of the offerings.
The SECURE Act starts by raising the age for required minimum distributions, known as RMDs, from investment accounts to 72 years of age from 70½ years. This recognizes that Americans are living longer and shouldn’t be forced to take money out of the markets just because of their age.
The legislation also makes it easier for employers to offer annuities in 401(k) and 403(b) retirement plans. (Read: heavy lobbying by insurance companies that sell these annuities. We’ll address the pros and cons of annuities in a future column.)
Also in the bill: Americans can take out money from retirement accounts without a penalty for a birth or adoption, up to $5,000.
The SECURE Act also allows employees to invest up to 15 percent, up from 10 percent, of paychecks to their 401(k) plan. Those contributions and any employer match grow tax free.
Since women are more likely to work part-time for at least some portion of their careers, the bill also requires retirement plans to open up to all employees who either work 1,000 hours in one year or at least 500 hours for three consecutive years. (Under current law, employers could set any eligibility rules they wanted, as long as employees who complete 1,000 hours of work in one year can enroll.)
One provision not related to retirement -- the SECURE Act would expand 529 college savings plans to cover the costs of apprenticeship programs and homeschooling. And here’s the best part: It allows 529 funds to be used to pay student loans up to $10,000. Thank you, Congress. This is a no-brainer.
For those who want to read the bills in full or call the sponsors, the SECURE Act incorporates measures from the previous Senate bill, dubbed the Retirement Enhancement and Savings Act, or RESA. The SECURE Act was introduced by House Ways and Means Committee Chairman Richard Neal (D., Mass.), along with Rep. Ron Kind (D., Wis.), Ways and Means Committee ranking member Kevin Brady (R., Texas), and our own Rep. Mike Kelly (R., Pa.).
Here are links to the House bill: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/NEAL_008_xml_0.pdf and the Senate version: https://www.finance.senate.gov/imo/media/doc/RESA%20Summary%204.1.19-banner-converted.pdf.
Vanguard Stewardship report
Local investment giant Vanguard has issued a new report on how it engages with public companies on governance and social issues, in a write-up published on the firm’s website: https://about.vanguard.com/investment-stewardship/perspectives-and-commentary/2019-semiannual-engagement-update.pdf.
It’s an important step for Vanguard, as it appears to name publicly for the first time 356 companies with which the mutual fund giant has engaged on issues such as board composition, executive compensation, and governance issues for the six months ended Dec. 31, 2018.
The $5 trillion-plus firm has come under more scrutiny for its shareholder activism efforts, and the Wall Street Journal last week reported that Vanguard will vote against board members who work a full-time job and serve on more than two corporate boards at a time.
Vanguard spokeswoman Carolyn Wegemann said the company has three general types of engagement:
Event-driven: “Typically discussions about a ballot item or contentious vote where we want to hear all relevant perspectives.”
Topic-driven: “These meetings are held to discuss matters within the board’s purview, that may, in our view, materially affect a company’s long-term value.”
Strategic: “Given the fact that our funds are near-permanent owners of company stock, understanding a company’s long-term strategy -- and how its governance practices align with that strategy -- is valued and helps us better understand how companies plan to stay relevant over the long term.”
BetterInvesting.org in Moorestown
BetterInvesting.org, a nonprofit investor education group, is hosting a free event at the Moorestown Public Library on Thursday, April 18. The library is at 111 W. Second St.
Their event is being held in conjunction with FINRA’s Money Smart Week program, and features testimony by two members about how they left behind Wall Street investing concepts, found BetterInvesting, and became self-educated. BetterInvesting will also feature a video on fraud prevention.
For more information, or to RSVP, email [email protected] or call John Pierce, secretary, South Jersey chapter of BetterInvesting, at 856-429-3752.
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