Lawmakers in Washington recently cleared a major obstacle to
passing retirement security legislation, but plenty of work remains before the
finish line — sending a bill to President Joe Biden's desk — is reached.
The House on March 29 overwhelmingly passed the bipartisan
Securing a Strong Retirement Act of 2022, referred to as SECURE 2.0, in a 414-5
vote. The bill, introduced by Ways and Means Committee Chairman Richard Neal,
D-Mass., and ranking member Kevin Brady, R-Texas, builds on the Setting Every
Community Up for Retirement Enhancement Act, known as the SECURE Act, which was
signed into law in late 2019.
Attention now turns to the Senate, where lawmakers are
expected to craft and markup a SECURE 2.0 package of their own that then will
have to be reconciled with the House bill. The House-passed package includes a
slew of provisions aimed at getting people to save more for retirement,
including requiring 401(k) and 403(b) plans to automatically enroll participants
upon becoming eligible; allowing 403(b) plans to participate in multiple
employer plans; creating a national online lost and found database for
Americans' retirement plans; and making changes to qualified longevity annuity
contracts, or QLACs, by removing the 25% cap — currently retirement savers can
spend up to 25% of their account on a QLAC.
The bill's auto-enrollment provision initially enrolls
participants at a floor of 3% of pay, and that contribution is then increased —
unless the participant opts out — by 1 percentage point each year until it
reaches 10%.
SECURE 2.0 would also raise the age at which individuals are
required to begin withdrawing a percentage of their tax-deferred retirement
plan to 75 from 72 over the next decade; permit an employer to make matching
contributions to a 401(k) plan, 403(b) plan or SIMPLE IRA on qualified student
loan payments; reduce the service requirement for part-time workers to
participate in an employers' retirement plan to two years from three; and
enhance the startup tax credit for small businesses launching a retirement
plan.
"After a lifetime of hard work, no American should face
financial uncertainty in their old age," Mr. Neal said in a statement
following the House vote. "This bipartisan legislation will make it easier
for workers to save and plan for their futures."
The bill has broad backing from the retirement community,
including from Thasunda Brown Duckett, New York-based president and CEO of
TIAA-CREF, who said in a statement that if enacted, the bill will "help
more Americans attain a secure financial future and increase their confidence
in achieving overall financial well-being."
The Senate is unlikely to simply take up the Securing a
Strong Retirement Act of 2022, said Michael P. Kreps, Washington-based
principal and co-chairman of the retirement services practice at Groom Law
Group. Rather, he and others in the retirement industry expect the Senate to
craft its own package in a process much like the House.
"The Senate rarely, if ever, just takes what the House
gives them, and the Senate has its own priorities," Mr. Kreps said.
The two relevant Senate committees — the Finance and Health,
Education, Labor, and Pensions committees — are expected to introduce and
markup bills of their own in the coming months.
‘Heartening' process
The Securing a Strong Retirement Act of 2022 is made up of
two retirement security packages introduced last year — a bill with the same
name introduced by Messrs. Neal and Brady that was approved out of the Ways and
Means Committee via a voice vote in May, and the Retirement Improvement and
Savings Enhancement Act, or RISE Act, which was passed out of the House
Committee on Education and Labor via a voice vote in November. House Education
and Labor Committee leaders — Chairman Robert C. "Bobby" Scott,
D-Va.; ranking member Virginia Foxx, R-N.C.; Health, Employment, Labor and
Pensions Subcommittee Chairman Mark DeSaulnier, D-Calif.; and subcommittee
ranking member Rick W. Allen, R-Ga. — introduced the RISE Act in November.
"The legislative process is really working as intended.
You have the relevant committees that are responsible for retirement policy
that are all working on their individual pieces," said Lance Schoening,
Des Moines, Iowa-based director of policy for Principal Financial Group.
Added Melissa Kahn, Washington-based managing director of
retirement policy for State Street Global Advisors' defined contribution team:
"It is amazing and heartening to see that there are issues where it really
transcends partisanship."
Mr. Neal, a longtime proponent of retirement security
legislation, has called on his Senate colleagues to make sure SECURE 2.0's
momentum continues. "In advancing this measure, we build on the positive
impact of the SECURE Act and continue expanding opportunities for Americans to
plan for their golden years," he said in his statement. "I hope the
Senate follows our lead and swiftly sends this widely supported measure to
President Biden's desk."
Senate's turn
On the same day as the House's SECURE 2.0 vote, the Senate
HELP Committee held a hearing on retirement security during which Chairwoman
Patty Murray, D-Wash., said she and Sen. Richard Burr, R-N.C., the committee's
ranking member, were working on bipartisan retirement legislation that they are
aiming to unveil this spring.
Sens. Rob Portman, R-Ohio, and Ben Cardin, D-Md., two
Finance Committee members and retirement security leaders, in May reintroduced
the Retirement Security and Savings Act, which features more than 50 provisions
aimed at getting people to save more for retirement, many of which overlap with
the House's SECURE 2.0 bill, though the Portman-Cardin bill notably does not
have an auto-enrollment provision.
The two senators said March 29 in a joint statement that
they're encouraged with the ongoing bipartisan and bicameral interest in
retirement security. "We will continue to support solutions that help
increase savings, expand access to retirement plans for working families and
promote lifetime income solutions," the senators said. "This is an
area of broad, bipartisan consensus. We look forward to working with Chairman
(Ron) Wyden, (D-Ore.), Ranking Member (Mike) Crapo (R-Idaho) and our House
colleagues to move this legislation through the Finance Committee as swiftly as
possible so that it can get to the president's desk."
Late change
Some changes were made in the House-passed bill during the
negotiation process that many stakeholders would like to see reversed in a
Senate bill, including allowing 403(b) plans to invest in collective investment
trusts.
The original bill that was advanced out of the Ways and
Means Committee last year included a provision to amend existing securities
laws to permit the use of CITs in 403(b) plans. However, the provision was
largely removed before the House vote after an objection raised by House
Financial Services Committee Chairwoman Maxine Waters, D-Calif., Groom Law
Group's Mr. Kreps said.
The Financial Services Committee had jurisdiction over the
provision because it involved securities law, which led to Ms. Waters'
objection. House leaders then removed the provision instead of referring the
bill to the Financial Services Committee for markup, Mr. Kreps explained.
A representative for Ms. Waters and the committee did not
respond to requests for comment.
"We were disappointed that there were last-minute
jurisdictional objections raised, so we are hoping that in the final bill those
types of issues can be worked out because that is going to be enormous in the
403(b) space in terms of bringing costs down for plan sponsors and, of course,
plan participants," Ms. Kahn of State Street Global Advisors said.
Long road ahead
Sources expect the Senate committees to mark up their own
retirement security bills in the spring or summer while House and Senate
leadership coordinate on reconciling any differences between the two chambers'
agreed upon packages. Then, perhaps after the midterm election in November,
Congress can attach SECURE 2.0 to a piece of must-pass legislation, like a
spending bill, and it can be signed into law, Ms. Kahn said.
But Mr. Kreps said it's still a long road ahead for SECURE
2.0's passage as Congress deals with higher-profile issues, like inflation, the
pandemic, the war in Ukraine and other topics.
"It's a heavy lift to get something done this year,
(but) it's not impossible," he said. "The nice part about retirement
is that you can usually come together and find some sort of bipartisan
compromise on this grab bag of small fixes. The challenging part is (SECURE
2.0) is a grab bag of small fixes so it's not something that drives politics
and so it's never a massive priority; it gets done when it gets done."
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