Congress wants to overhaul retirement plans. Here’s what might be coming.

Tucked halfway down into a 4,155-page spending bill that proposes $1.7 trillion to fund the federal government through much of 2023 are proposed changes to how retirement plans work. Intended to boost retirement savings and access to 401(k) and individual retirement accounts, the Secure Act 2.0 is aimed at low- and middle-income workers, those strapped with student debt and people who may not yet have a long-term retirement account.

Will Hansen, the chief government affairs officer with the American Retirement Association, which advocated for Secure 2.0, told The Washington Post it's the largest bill covering retirement in more than 15 years. "These provisions will increase the number of small businesses that are offering a plan, as well as increase the savings Americans are putting aside for retirement," he said.

To avert a federal shutdown, Congress has a Friday deadline to pass the epic "omnibus" bill that comprises the retirement-plan measures and many other provisions, including assistance to Ukraine, military funding and banning the use of TikTok on government devices.

Here are some of the key proposals for retirement savings.

Starting in 2025, most businesses would be required to automatically enroll employees in 401(k) plans. Employers would contribute 3 to 10 percent of their wages. Each year, the contribution would increase by 1 percent until it reaches at least 10 percent, though not more than 15 percent.

Businesses with 10 or fewer employees and businesses that have been open for less than three years would be exempt, along with church and government plans.

For workers earning less than $71,000 per year, the federal government would provide a 50 percent match for the first $2,000 in employee cash contributions, meaning the government would provide a maximum of $1,000. That cash would be deposited directly into the retirement accounts. Under current law, the matching program is a tax credit - but that doesn't help lower-earning workers who don't owe taxes.

"This is a big deal," Hansen said. "It will help current savers save more and bring newer people in the system, knowing there is government match."

Early withdrawals from a 401(k) typically come with a 10 percent tax. Under the new proposal, a person would be able to make one penalty-free withdrawal for unexpected or immediate expenses arising from family or personal needs. One withdrawal of up to $1,000 would be allowed per year if the amount was repaid. If it was not, another withdrawal could not be made for three years.

The restrictions would be in place to prevent abuses such as someone putting money into their retirement account to receive matches and immediately withdrawing money, Hansen said.

Nearly half of Americans would struggle to cover an unexpected $400 expense, and nearly 60 percent of people with retirement accounts and no emergency savings have tapped into those long-term savings, according to the Senate Finance Committee. A study cited by the committee showed that at least a month of emergency savings could make a difference.

The proposed changes would give employers the option of offering their lower-paid employees a savings account linked to their long-term retirement plans. Employers could also automatically opt employees into the savings accounts, contributing no more than 3 percent of the employee's salary. The account would be capped at $2,500, and additional money would be routed into the retirement account.

Current law says that part-time employees can have a 401(k) plan if they work with their employer for one year with 1,000 hours of service, or three consecutive years with at least 500 hours of service annually. The new law would reduce that three-year period to two years for eligibility.

Under current law, people with 401(k) plans must take out money from their accounts starting at 72, to ensure people use the money rather than pass it down through their estates. The new proposal would increase that mandatory age to 73 starting in 2023 and then 75 starting in 2033.

Raising the age for required withdrawals lowers the risk of "depleting an retirement account to prior to death," Hansen said.

People strapped with student debt may not be able to afford to put money in retirement accounts, causing them to miss out on employers’ matching contributions. Under the proposed law, employers could choose to make contributions to retirement accounts based on an employee’s student loan payments.