National Conference on Public Employee Retirement Systems

The Voice for Public Pensions


The SECURE Act 3.0

The overarching themes of the next retirement bill should roughly parallel what we've seen in its predecessor legislation – savings enhancement and increased coverage, preservation of income, and simplification and clarification.
The SECURE Act 3.0
By: Tony Roda, Partner, Williams & Jensen

During the presentation by Congressional tax counsels at the NCPERS Legislative Conference in January, the words “SECURE Act 3.0” were uttered. That Congress once again may assemble a major retirement bill should not come as a surprise to anyone.

As a refresher, know that the original SECURE Act was signed into law in December 2019, and was quickly followed, quickly in Congressional terms, by enactment of the SECURE Act 2.0 in December 2022.

So, why should Congress's interest in a SECURE Act 3.0 not be a surprise? Well, let's look at a few statistics. In 2024, 12,000 Americans each month will turn age 65. That equals 4.38 million Americans in this calendar year. Divided by 435 House Congressional districts, that is more than 10,000 people per district. Easily enough to sway a close election.

Turning age 65 triggers eligibility for Medicare. For those still working, reaching Medicare age often prompts a more serious consideration of retirement and all the issues that arise from that decision. Also, older individuals tend to vote more regularly, and many remain politically active. These facts have not been lost on Congress, and in bipartisan recognition, Congress is attuned to the interests of retirees and near-retirees. This rare bipartisanship has led to the SECURE Act, the SECURE Act 2.0, and likely in the not-too-distant future, the SECURE Act 3.0.

The overarching themes of the next retirement bill should roughly parallel what we've seen in its predecessor legislation – savings enhancement and increased coverage, preservation of income, and simplification and clarification.

One major piece of the SECURE Act 3.0 puzzle could be legislation recently introduced by House Ways and Means Committee Ranking Member Richard Neal (D-MA). The Automatic IRA Act (H.R. 7293) would require employers that do not have a retirement plan and have more than 10 employees to enroll them in an IRA through a payroll deduction. Employees can always opt out of the IRA. State and local government plans and church plans would be exempted from the requirement. This version of the auto IRA bill has attracted some industry support, including the powerful American Council of Life Insurers.

Another leading contender for SECURE 3.0 could be the 401Kids Savings Act, which was introduced at the end of January by Sen. Bob Casey (D-PA) and Rep. Don Beyer (D-VA) – S. 3716 and H.R. 7162, respectively. The legislation would build upon the platforms at the state level that manage 529 college savings accounts. The Kids accounts would be managed by state treasurers and the accounts would be for newborns and children under age 18. Families, non-profits, employers, foundations, and others could contribute to the accounts, and the monies could be used for post-secondary education and training, starting a small business, buying a first home, or retirement savings.

It is important to note, however, that both the Automatic IRA Act and the 401Kids Savings Act will need strong bipartisan support for them to be viable for SECURE 3.0.

Specifically related to public sector retirees, in this case retired first responders, the SECURE Act 3.0 could bring about an increase in the annual cap under the Healthcare Enhancement for Local Public Safety Act (HELPS). The SECURE Act 2.0 made direct payment under HELPS optional and created an alternative to the original method, namely allowing the retirement system to make the distribution to the retired public safety officer. The retiree can now make the premium payment to the insurance provider and remain eligible for the up to $3,000 per year tax exclusion.  

Successfully fixing the direct payment requirement in SECURE Act 2.0 now allows NCPERS and others in the public safety stakeholder community to focus on increasing the annual exclusion cap. The $3,000 cap has not been increased since its inception in 2006 despite significant increases in premiums for health care and long-term care insurance over the ensuing 18-year period.

In addition, numerous retirement-related provisions in the tax code are indexed for inflation, including annual limits for contributions to 401(k), 457(b), and 403(b) accounts. This is done as a matter of fairness for taxpayers. During the upcoming consideration of the SECURE Act 3.0, we expect discussions on whether to index the HELPS annual exclusion for inflation for future years.

Also on the first responder front, S. 4267, which was introduced by Sen. Michael Bennet (D-CO) in the 117th Congress, would create a new tax credit for retired first responders for health care premiums of up to $4,800 per year. This or similar legislation could be considered as part of the discussions on SECURE 3.0.

Finally, an effort may be launched to extend the HELPS tax exclusion to all public sector workers. This proposal could parallel the existing HELPS exclusion or be designed as a tax credit, much like Sen. Bennet's previous legislation.

While we don't expect retirement legislation to be enacted in this 118th Congress, we have important work to do over the next year. We need to refine any new policy proposals, draft legislation, identify bipartisan and bicameral sponsors who serve on the committees of jurisdiction, and introduce the bills. We should look at 2024 as the staging ground for the next round of retirement tax law changes, which will begin to be considered in earnest by the next Congress.

Please be assured that as we learn more about possible components of the next major retirement legislation, we will keep you apprised.

Tony Roda is a partner at the Washington, D.C. law and lobbying firm Williams & Jensen, where he specializes in legislative, regulatory, and fiduciary matters affecting state and local pension plans. He represents the National Conference on Public Employee Retirement Systems and state-wide, county, and municipal pension plans in California, Colorado, Georgia, Kentucky, Ohio, Tennessee, and Texas. Tony has an undergraduate degree in government and politics from the University of Maryland, J.D. from the Catholic University of America, and LL.M (tax law) from the Georgetown University Law Center.


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