Bill Overview
Title: EARN Act
Description: This bill revises or establishes new tax provisions relating to retirement plans for individuals, retirees, public safety officers and military personnel, disaster relief, and employer plans. The bill revises various provisions relating to individual retirement plans, including provisions to (1) establish a safe harbor for automatic enrollment plans; (2) allow a refundable income tax credit, up to $1,000, for retirement savings contributions; (3) allow penalty-free withdrawals from plans for emergency expenses; (4) modify age requirements for catch-up provisions; (5) allow penalty free withdrawals from plans in domestic abuse cases; (6) allow transfers of plans (portability); and (7) modify the age requirement for ABLE programs for disabled individuals. The bill makes changes to plans for retirees, including by (1) increasing the age for the start of mandatory plan distributions, (2) reducing the excise tax on certain accumulations in qualified retirement plans, (3) recovering retirement plan overpayments, (4) modifying certain Roth IRA distribution requirements, and (5) allowing plan distributions for individuals with a terminal illness. The bill modifies provisions relating to retirement plans of public safety offices and military personnel. It allows (1) small employers a tax credit for establishing military spouse retirement plans, (2) penalty-free distributions to firefighters, (3) a tax exclusion for certain disability-related payment for first responders, and (4) an exemption from the early withdrawal penalty for distributions to certain state and local corrections employees. The bill establishes special tax rules for the use of retirement funds for federally declared disasters. The bill also modifies or establishes requirements relating to employer plans, including (1) allowing a tax credit for small employers with respect to safe harbor requirements for retirement plans, (2) increasing the credit limitation for small employer pension plan startup costs, (3) reforming family attribution rules, (4) providing for starter 401(k) plans for employers with no retirement plan, (5) allowing a tax credit for small employers that adopt an automatic portability arrangement, (6) modifying Internal Revenue Service mortality tables, (7) extending the period for transferring excess pension assets to retiree heath accounts, and (8) deferring the tax on certain sales of employer stock to employee stock ownership plans sponsored by S corporations. The bill modifies provisions relating to the retirement of U.S. Tax Court judges, including participation in the Thrift Savings Plan.
Sponsors: Sen. Wyden, Ron [D-OR]
Target Audience
Population: Individuals with retirement plans or beneficiaries
Estimated Size: 110000000
- The bill impacts individuals with retirement plans. This includes employees who participate in employer-sponsored retirement plans such as 401(k)s or pension plans.
- Retirees who are currently drawing from retirement accounts could be affected by any changes in tax provisions.
- Public safety officers such as police officers, firefighters, and other emergency personnel who often have specific retirement arrangements are targeted by this bill.
- Military personnel, both active and retired, who either have special retirement plans or standard individual retirement accounts will be impacted.
- Employers who provide retirement plans to their employees will be affected, as changes in tax provisions will impact how these plans are managed and contribute to employee benefits packages.
Reasoning
- The EARN Act is specifically designed to enhance the retirement benefits for various groups including individual druggers, retirees, public safety officers, military personnel, and employers that provide retirement plans. These groups are diverse in demographics, spanning different ages, incomes, and retirement statuses.
- The $1.2 billion budget in year 1 and $11 billion over 10 years suggests a focus on long-term sustainable improvements rather than immediate sweeping changes. Therefore, the benefits might be gradual, improving over the years rather than instantaneously impacting wellbeing scores.
- Considering diversity, I included active duty military personnel, which account for potential large groups impacted, and retirees who are likely to be most affected by retirement-focused policy changes. The statement of opinions reflects both positive and potentially skeptical views towards economic-based improvements in wellbeing.
- A few participants have been included who may not feel a significant change in wellbeing due to their economic position or existing financial stability.
Simulated Interviews
retired public safety officer (Florida)
Age: 65 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 12/20
Statement of Opinion:
- I'm hopeful that these changes could add more security to my retirement. It's always been tight with pension alone.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 9 | 6 |
software engineer (California)
Age: 40 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- It sounds beneficial but I need more details on direct impacts. Tax rewrites can be complex and may take time to trickle down.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
military personnel (New York)
Age: 30 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- Military benefits are generally decent, but any policy that further secures my future is a comfort.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 9 | 8 |
public school teacher (Texas)
Age: 55 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- As a teacher, my pension is crucial. Any improvement is welcome, but I hope it won't complicate tax filings.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 9 | 6 |
retired military officer (Ohio)
Age: 70 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- Changes in tax provisions might help me stretch my retirement savings further; that would be a relief.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 5 |
| Year 5 | 9 | 5 |
| Year 10 | 9 | 5 |
| Year 20 | 9 | 5 |
small business owner (Illinois)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 11/20
Statement of Opinion:
- Better benefits plans could help with employee retention, which is good for business.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
police officer (Colorado)
Age: 29 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 13/20
Statement of Opinion:
- Getting a clearer path and incentives on savings helps me a lot as I'm just starting to plan my future.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
retired teacher (North Carolina)
Age: 62 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 14/20
Statement of Opinion:
- I'm cautious about policy changes as I've planned my finances tightly; hopefully, it doesn't complicate my taxes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 7 | 6 |
factory worker (Michigan)
Age: 50 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 16/20
Statement of Opinion:
- Plans sound good but practically, I am unsure how much I'll feel improved taxes unless directly impacting my payroll.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
retired nurse (Arizona)
Age: 80 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 9/20
Statement of Opinion:
- Any relief brought through tax savings could ease my financial stress, but I'm wary of relying on political changes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 6 | 4 |
| Year 5 | 6 | 4 |
| Year 10 | 6 | 4 |
| Year 20 | 6 | 4 |
Cost Estimates
Year 1: $1200000000 (Low: $1000000000, High: $1400000000)
Year 2: $1180000000 (Low: $980000000, High: $1380000000)
Year 3: $1160000000 (Low: $960000000, High: $1360000000)
Year 5: $1120000000 (Low: $920000000, High: $1320000000)
Year 10: $1060000000 (Low: $860000000, High: $1260000000)
Year 100: $600000000 (Low: $500000000, High: $700000000)
Key Considerations
- The bill's impact on government tax revenues is a critical consideration, given the potential for both short-term decreases and long-term benefits.
- The demographic scope, especially concerning the inclusion of military personnel and public safety officers, could impact government expenditure on pensions.
- The administrative adjustments required for employers due to changes in retirement plan management should be considered.