President Trump is looking for ways to make it easier for Americans to save and spend in retirement.
Specifically, an executive order the President is expected to sign Friday will seek a review of how required minimum distributions from 401(k) plans and individual retirement accounts are calculated, and for regulators to see how small businesses can more easily band together to offer retirement plans to their workers.
As it stands, retirees must begin taking withdrawals, or RMDs, at age 70½. The amount they must take out annually is based on life expectancy tables issued by the IRS. The purpose of reviewing the rules would be to update those tables and allow account holders to take lower RMDs. (Roth versions of 401[k] plans and IRAs do not come with mandated distributions until after the death of the owner.)
Meanwhile, small businesses face obstacles in teaming up to offer 401(k) plans because current law allows only related businesses — i.e., members of a trade association — to join forces in so-called multiple employer plans.
Additionally, it can be costly and burdensome for small companies to set up and maintain retirement plans on their own. Research from The Pew Charitable Trusts shows that 37 percent of small-business owners say such plans are too expensive to set up, and 22 percent say their organization does not have the resources to administer a plan.
If regulations were eased, unrelated companies would be able to team up and share the associated costs and administration.
The executive order, planned for release at an afternoon event in North Carolina, comes as House GOP members develop their own plan for retirement savings. That measure, part of broader tax legislation currently being drafted, would also ease rules on multi-employer plans. It is expected to be introduced in September.
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