Workplace retirement policy will be on the minds of lawmakers returning to Capitol Hill next week, as a deadline to pass major retirement access and administrative relief legislation looms.
At least three different bills introduced this legislative session form the rough outline of a package dubbed “SECURE Act 2.0" that congressional staffers are trying to consolidate and attach to a government spending bill expected to be voted on in December.
Together, provisions in most of the SECURE proposals would increase the minimum age by which Americans are required to start drawing down on their 401(k) balances, and create incentives for employers who don’t offer workplace retirement benefits to start up low-cost plans. They’d also build in protections for worker investors who have lost track of their accounts or who can’t yet begin saving for retirement because they are straddled with student debt.
Advocates for some or all of the measures on both sides of the political spectrum believe time is running out for desperately needed employer-sponsored retirement plan relief. Inflation is driving up the cost of everyday essentials, and driving down the value money saved now will have when a worker retires. But political momentum for most post-election bipartisan legislation will be limited in a lame-duck Congress laser focused on judicial appointment votes, must-pass spending, and defense authorization.
Any or all SECURE Act 2.0 provisions could be reintroduced in the next Congress, but “the stars are aligned right now” to pass bipartisan legislation, said Andy Banducci, senior vice president for retirement and compensation policy at the ERISA Industry Committee.
There’s a rare window opening for bipartisan legislation as Democrats appear poised to lose control of at least one chamber in Congress after the midterm elections, but a massive Republican “red wave” has also failed to materialize.
“There’s an opportunity here to help plan sponsors, help retirees, and help participants,” Banducci said. “Even if there wasn’t that statutory deadline, if the opportunity is presented to achieve something good for participants and plan sponsors, Congress should do it sooner rather than later.”
Similarities and Differences
A new law would be the first sweeping legislative move on retirement benefits since Congress successfully passed the original SECURE Act in 2019 with bipartisan support.
This time around, the House already passed the Securing a Strong Retirement Act (H.R. 2954) by an overwhelming 414-5 vote in March. The Senate committees responsible for pension plans and finance cleared the Rise and Shine (S. 4353) and EARN (S. 4808) Acts in June.
At least 39 provisions in all three bills are nearly identical. All three bills would expand retirement access to more part-time workers, allow nonprofit pension plans to pool resources, and extend the period of time plans have to amend their documents to reflect legislative changes.
The three bills seek to achieve six additional retirement access outcomes, but in different ways. The House version of the bill would require all new 401(k) and 403(b) plans to automatically enroll new workers, but the EARN Act only incentivizes automatic enrollment by modifying the discrimination testing employers face and offering them a new tax credit.
Similarly, the three bills modify the credit taxpayers earn for contributing to retirement plans and tackle lost or missing accounts in different ways. The House version of the SECURE Act 2.0 legislation would require the US Labor Department to create a comprehensive lost-and-found database that allows workers to find missing 401(k) accounts. The EARN Act would empower the US Department of the Treasury to maintain a database of employer contact information, aimed at encouraging workers to track down that information themselves.
“All of the issues are resolvable if there is the political will to move the SECURE 2.0 package this year,” said Michael Kreps, a former Democratic Senate committee staffer who now serves as principal and co-chair of the retirement services practice at Groom Law Group Chartered. “There are definitely people pushing to get it done, and congressional staff is burning the midnight oil.”
An additional 52 provisions are unique to each specific bill, such as a requirement in the House version that plans would have to provide printed paper statements to participants at least once a year.
Automatic enrollment and paperless delivery have emerged as notable sticking points in the SECURE Act 2.0 negotiations that, while not certain to sink the package if they aren’t reconciled, could slow down progress past the January deadline.
Employer groups aren’t completely in agreement about the idea of a federal mandate requiring new workers to be automatically enrolled. It’s a step closer to the retirement plan mandate Democrats toyed with in an early iteration of President
Recordkeeping platforms such as Fidelity Investments Inc. oppose costly paper participant disclosure requirements that many workers dislike and consider less secure than electronic communication, they argue. Other groups contended that older Americans who lack reliable internet connectivity, in particular, depend on printed statements for critical information about their retirement accounts.
“It’s the issues that stakeholders don’t agree on that slows this process down,” said Tonya Manning, chief actuary and wealth practice leader at Buck Global LLC. “The litmus test that will determine whether SECURE Act 2.0 is passed this year is industry support.”
More recently, last-minute bills have been thrown into the mix of possible SECURE Act 2.0 contenders, complicating the agreement process that has hinged on equal Republican and Democratic support. South Carolina Republican Sen.
A coalition of benefits advocates and retirement industry stakeholders have tried to keep lawmakers on message, however, in hopes of passingretirement access legislation sooner rather than later, said Eric Stevenson, president of retirement solutions at Nationwide Mutual Insurance Co.
“It feels like we’re in a good position,” Stevenson said. “That’s got us really excited.”