The $1.7 trillion spending bill (H.R. 4373) to fund the government through the 2023 fiscal year has now been passed and signed into law.
The bill provides over $770 billion in funding towards domestic (non-defense discretionary) programs and more than $855 billion for defense spending. It also avoids a potential government shutdown.
While several Republicans in the Senate supported the omnibus spending bill (68-29 vote), nearly all of them rejected it in the House (225-201 vote). However it had enough votes to pass and President Biden has signed the bill.
[This bill] advances key priorities for our country and caps off a year of historic bipartisan progress for the American people.”President Biden
Below are some of the ways monetary provisions in the 4000 page bill will be made available over the coming years.
Military and Federal Employee Pay Raise Confirmed
The Defense Department and (much needed) additional support for Ukraine got the majority of the funding in the omnibus bill.
Pandemic SNAP Benefits Cut – But Child Support Program Expanded
The omnibus bill includes over $13 billion of increased funding for the SNAP program and a boost of $28.5 billion for child nutrition programs. This includes a $40 p/month grocery benefit for kids, starting in the summer of 2024.
Children would be eligible for $40 grocery benefit (paid via reloadable debit cards) during the summer of 2024. Enrollment would be automatic for kids who qualify for free or reduced price school meals.
However pandemic-era expansions of the SNAP program, including free school meal benefits were not funded and will expire in March 2023 or when existing funding runs out. This would result in a cut to average SNAP benefits of $82 per month for families.
Older adults and seniors would see their monthly SNAP benefits cut by over $200 ($281 to $23) on average as the pandemic SNAP/food stamp benefits are phased out.
Boost to Retirement Savings (Secure Act 2.0)
New measures in the bill will have far reaching consequences for currently working and retired Americans. This includes allowing employers to include employees’ student loan payments in their retirement match.
This measure would allow more employees with student debt who are unable to make pre-tax contributions to benefit from the employer match in their retirement accounts.
Provisions in the bill also allow raising the required age for mandatory withdrawals from tax-deferred retirement accounts from 72 to 75 over time starting in 2023 (RMD age = 73) until 2033 (RMD age = 75).
This will allow tax deferred accounts to grow tax-free for a longer periods, potentially increasing the amounts available for retirees
Automatic enrollment or sweeps, in 401(k) and 403(b) plans will be legislated for new plans after 2025 and money will be automatically taken out of your paycheck and deposited into the company sponsored retirement savings account unless you explicitly opt-out.
The automatic pre-tax default contribution will start at 3% and increase annually by one percent until it reaches 10% (by 2032). However automatic contributions cannot go over 15% of an employee’s pre-tax salary.
Small employers with less than 10 employees or sub-3yr old business’ are exempt from this requirement.
Emergency Savings from Your Retirement Plan
There will also now be a new exemption for 401K withdrawals that allows $1,000 be withdrawn per year by workers in an emergency for meeting unforeseeable or immediate financial needs.
You will have to replenish any withdrawals within three years or face penalties if you want to make another emergency withdrawal.
529 to Roth IRA changes
From 2024, it will be possible to transfer up to $35,000 from a 529 account – a tax-advantaged investment account designated for educational expenses – into a Roth IRA account without incurring penalties.
This option will only be available for 529 accounts that have been open for at least 15 years and is subject to annual IRA contribution limits.
Other Retirement Plan Changes
The following measures have been approved under Secure act 2.0:
- Raising catch-up contribution limits for individuals aged 60 to 63. Starting in 2025, the limit for catch-up contributions for savers in that age range would increase from $7,500 a year to at least $11,250.
- Providing financial incentives for contributing to a retirement plan for workers making less than $71,000 annually.
- Expanding access to retirement plans for long-term, part-time workers.
- Widening access to the Saver’s Credit (a tax credit for retirement plan contributions) for lower and middle-income employees.
- Establishing a database to help individuals locate their 401(k) and pension plans, known as a ‘lost and found’ database.
Education Support via Pell Grant Increase
The bill provides funding to raise the maximum Pell Grant by $500 to $7,395, which will benefit many lower-income college students.
This in addition to the student-debt forgiveness program passed earlier in the year and additional funding of over $120 million for other federal higher education programs.
Medicaid Eligibility Changes
Medicaid recipients could also lose benefits in the coming year (from April) as the bill gradually ends pandemic-era health emergency rules that have protected low-income Americans from losing access to the federally funded health insurance program. States, who administer the program, will have to report enrollment changes.
But it does allow states to extend Medicaid coverage to new mothers for a full year and preventing children from losing Medicaid or Children’s Health Insurance Program (CHIP) coverage for a continuous 12 months, regardless of changes in family income.
What was Left Out of the Bill?
While a lot of spending was included in the bill, notably an expansion to the Child Tax Credit (CTC) was left unfunded as a compromise to Republican demands.
There wasn’t funding for another (4th) stimulus check either, but this was not expected given current inflation levels and low unemployment.