Sen. Cruz said to be keeping SECURE Act in limbo despite overwhelming passage in U.S. House
WASHINGTON D.C. (Texas Insider Report) All eyes have turned to the U.S. Senate to pass a retirement security and savings package after the House of Representatives recently approved its SECURE Act featuring a wide-range of investment improvements that included a key Gold Star Families tax provision by a 417-3 vote.
The need for a Gold Star Families tax law change impacting those who have lost family members in military service was discovered after implementation of the Tax Cuts & Jobs Act of 2017 caused many military families to pay substantially higher taxes on their Defense Department Benefits Package some by as much as five times more.
The Houses SECURE Act bill H.R.1994 the Setting Every Community up for Retirement Enhancement Act of 2019 would also make it easier for smaller employers to join multiple-employer retirement plans and creates a more favorable tax treatment option for parents who want to withdraw funds from their IRA or 401K plans to adopt a child.
Currently couples seeking to adopt but who may not have immediate funds or resources to help finance the adoption pay a penalty to use the money saved in an IRA or 401K account to facilitate the adoption.
Despite the Senate having also unanimously passed its own Gold Star Families Tax Relief Act representatives from the retirement and investment industries initially anticipated the Senate would try to pass its own Retirement Enhancement Savings Act (RESA) and attempt to bridge any gaps between the House and Senate bills in Conference Committee. But shortly after the nearly unanimous House vote a rare and substantial achievement in todays political environment Senate leaders indicated they would forgo RESA and hotline the SECURE Act in order to move it through the Senate via a fast-moving process known as Unanimous Consent.
Their decision may have been aided by the fact that the Houses SECURE Act of 2019 was added to a much broader bipartisan bill designed to address a wide range of issues long backed by the investment retirement and estate planning industries.
If no senator were to object to the unanimous consent offering the bill would simply pass as is.
But sources say Sen. Ted Cruz (and likely others) placed a hold on the legislation objecting to the removal of certain provisions in the House bill that would have allowed 529 College Savings Plan funds to be used for home schooling costs and supplies for K-12 students among other objections.
Since holds can be placed anonymously sources said its difficult to tell how many senators are blocking the bill and what their concerns are.
My hope is they do this sooner rather than later because as weve seen in the past the provisions in the SECURE Act are not new theyve been around for the past couple of years said Srinivas Reddy Senior Vice President of Retirement & Income at Principal Financial Group in Des Moines Iowa.
The longer it takes the more the likelihood it doesnt pass said Reddy who also serves a chairman of the U.S. Dept. of Labors ERISA Advisory Council.
It was a bit of a surprise that they decided to take up the SECURE Act mostly that they decided to take it up so quickly said Christopher Spence Senior Director of Federal Government Relations for TIAA-CREF in Washington DC adding that the retirement community would prefer the Senate pass the bill via unanimous consent as soon as possible.
The longer it hangs out there the more uncertain and nervous its going to make everyone" Spence said.
While supporters of the SECURE Act are still confident it will pass concerns and frustrations are growing with each passing day including on the House-side of the Capitol.
Im incredibly pleased that were moving quickly to address the Gold Star Families tax issue in the House and hope we can complete work on that problem as quickly if not more quickly than the rest of the provisions in this bill said Cong. Adrian Smith (R-NE).
This bill reverses the tax hikes (inadvertently) included in the Republican Tax Bill said Cong. Mike Thompson (D-CA).
Hiking taxes on Gold Star Families and the families of 1st Responders is unjust. It insults how sacred these benefits are Thompson said.
After adding the provision to repeal the portion of the law that taxes Gold Star Family benefits as earned income rather than as unearned income which is subject to a higher tax rate a key House lawmaker who authored the Tax Cuts & Jobs Act of 2017 says it was unintentional and needs to be corrected as a matter of principle.
We did not see one unintended consequence and in this (SECURE Act) bill we worked together Republicans and Democrats to make sure we honor our Gold Star Families said Cong. Kevin Brady (R-TX) the ranking Republican on the House Ways & Means Committee.
Mr. Cruzs office has not responded to numerous media requests for comment on the issue.
As of now the bill remains in limbo as Senate leaders try to quell Senator Cruzs objections.