Here’s a simplified summary of the Retirement Simplification and Clarity Act (H.R. 10467):
This bill aims to change tax rules to allow workers aged 50 and older to move (or “roll over”) money from their 401(k) retirement plans into individual retirement annuities (IRAs) while they are still working. Currently, such rollovers may be restricted until a person retires or leaves their job.
Key Points:
- New Rollover Option:
- Employees aged 50+ can transfer part or all of their employer-contributed 401(k) funds to an individual retirement annuity (IRA) before retiring.
- Simplified Explanation Rules:
- Retirement plans must provide clear, plain-language explanations to participants about their options, including:
- The 30-day review period before taking action.
- Tax implications, including income tax and potential penalties for early withdrawals.
- Rollover eligibility and restrictions (e.g., hardship withdrawals cannot be rolled over).
- Automatic payments for small account balances under $7,000.
- Options when changing jobs, such as keeping money in the current plan or moving it to another.
- Retirement plans must provide clear, plain-language explanations to participants about their options, including:
- Tax Withholding Rules:
- Direct rollovers (funds transferred directly between plans) won’t have the usual 20% tax withholding.
- If a person takes a distribution, they have 60 days to roll it over to avoid taxes.
The bill would take effect starting January 1, 2025, and aims to provide more flexibility for older workers in managing their retirement savings.
See full text of the bill here: https://www.govinfo.gov/content/pkg/BILLS-118hr10467ih/xml/BILLS-118hr10467ih.xml
Disclaimer: Some parts of this article were generated using a specialized AI to summarize and simplify the bill in order to make it readily accessible. The goal is to make it easy to read and understand without bias, opinion or analysis