Pub. 10 2020-2021 Issue 6

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S March • April 2021 9 • Reduce penalties for RMD failures. • Provide a second (age 60), higher IRA catch-up contribution limit. • Index IRA catch-up contributions for inflation. • Increase the limit for IRA and retirement plan assets that are exempt from RMD calculations under qualifying longevity annuity contract (QLAC) rules. • Reduce certain IRA error penalties and permit more self-correction. • Permit matching contributions, e.g., to SIMPLE IRAs — based on student loan payments. Automatic IRA Act It is widely accepted that up to 40% of American workers do not have access to a workplace retire- ment plan. A concept that dates back more than a decade proposes universal, automatic saving to an IRA through a worker’s place of employment if no other retirement plan is available. This is the concept embodied in the Automatic IRA Act, which has been introduced in several previous Congress sessions. In the absence of action at the federal level, many states have acted independently to establish automatic IRA-based saving programs, which — while beneficial for those covered — have left geographic gaps and a patchwork with differing program rules. A uniform national automatic IRA program could close these gaps and address differences. • Employers in business less than two years or employing fewer than 10 employees would be exempt. • Employees would be automatically enrolled and contributions with- held from pay, but they would be able to opt-out. • Accounts would be Roth IRAs un- less a Traditional IRA was elected. • Contributions would likely begin at 3% of pay, but with latitude to range between 2% and 6%. • Investments would include bal- anced, principal preservation and target-date funds, as well as guar- anteed insurance contracts. Past sponsors of automatic IRA legislation have included Rep. Richard Neal (D-MA) and U.S. Senator Sheldon Whitehouse (D-RI). HSA Enhancements Affordable health insurance for Americans continues to be an extreme- ly challenging goal. One increasingly common option — an alternative to the comprehensive “major medical” health insurance model — is a high deduct - ible health insurance plan linked to a saving and spending account known as a health savings account or HSA. This approach is intended to offer a path to lower health insurance premi- ums and allow individuals to save in a tax-advantaged manner for expenses below their health plan deductible and copay amounts they owe. What initial- ly began as a temporary test program under medical savings account (MSA) nomenclature later evolved into the HSA we know today. With many U.S. employers offering employees an HSA-based program as one — or perhaps the only — health insurance option, much focus has been on how the HSA might be tweaked to improve its usefulness. Following are some of the proposed HSA modifica - tions, a composite of provisions from several bills introduced in the 116th Congress. Some, or all, could be pre - sented again in the 117th Congress that has just been sworn in. • Increase maximum annual HSA contributions; some have proposed doubling the limits. • Expand the treatments for which a plan’s high deductible need not be met before benefits commence, such as chronic care services and more medications, including non- prescription drugs. • Permit care at an on-site employer or retail clinics without forfeiting HSA contribution eligibility. • Treat costs of participating in a fixed-fee primary care arrange - ment as HSA-eligible expenses. • Allow coverage of offspring under a parent’s HSA-compatible health plan to age 26; would mirror the Affordable Care Act (ACA). • Define ACA bronze-level and cer - tain catastrophic health insurance plans as HSA-compatible. • Treat a defined portion of HSA ac - cumulations spent for “fitness and health” as HSA-eligible expenses. • Allow a fixed amount from health flexible spending arrangements (health FSAs) and health reim - bursement arrangements (HRAs) remaining at year’s end to be rolled over to an HSA. • Allow Medicare-eligible individu- als enrolled only in Part A (Medi- care-provided hospital care) to remain HSA contribution-eligible. Other Legislative Ambitions Beyond the possibilities noted above, other initiatives that may be in play in the 117th Congress could include getting closer to universal availability of 401(k)-type workplace retirement plans and addressing the solvency of under-funded defined benefit pension plans. These could be more contentious, carrying as they might the stigmas of “mandate” and “bailout,” both of which draw resistance from a substantial num- ber of lawmakers. n Visit ascensus.com for more industry news.