Edits to the bill ahead of Tuesday’s vote included the addition of changes to the “saver’s credit,” which offers tax credits to lower earners who stow money in retirement savings accounts. Under current law, the benefit is worth up to 50 percent, 20 percent or 10 percent of contributions to plans, depending on income.
The provision added to the Neal-Brady bill would set the benefit at 50 percent of contributions, phasing the resulting payout down based on income — a more gradual reduction in the benefit than current law. Eligibility for the credit would begin at lower income thresholds than current law, but allow bigger benefits for savers with the lowest income.
The changes take effect in 2027, and would cost around $1.9 billion per year during the latter part of the decade, according to a Joint Committee on Taxation estimate.
Several pieces of that bill overlap with the Neal-Brady measure, including the creation of a “lost and found” database for location of retirement accounts and allowing low-dollar gifts and incentives for employees to join plans, among provisions. Other provisions would supplement the Ways and Means bill, including allowing employers to convert former employees’ workplace savings plans into Individual Retirement Accounts as long as they hold less than $7,000, rather than the current $5,000 limit.
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