By Julie Kramer
According to employment law experts, the Secure Act 2.0 is likely to pass before the end of the year. The proposed legislation is intended to help Americans save for retirement by making corporate-sponsored retirement plans more accessible and attractive to both employers and employees.
The Secure Act 2.0—which builds on the Secure Act of 1999–is poised to become the most sweeping piece of retirement legislation in recent history. That’s why employers should get up to speed on this important benefits and compliance issue, although the specifics are still evolving.
Surprise: The Secure Act 2.0 Refers to Three Bills, Not One
Part of what makes Secure 2.0 so complex is that it’s not a single bill. Rather, the term refers to a trio of related bills currently in the House and Senate, including:
- The Securing a Strong Retirement Act of 2022 (H.R. 2954), which passed in the House in March 2022.
- The Enhancing American Retirement Now (EARN) Act (S. 4808), which was approved by the Senate Finance Committee in June 2022.
- The Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (Rise & Shine) Act (S. 4553), which was approved by the Senate Health, Education, Labor and Pensions (HELP) Committee in June 2022.
None of these bills has been brought up for a vote in the Senate to date nor have the latter two been voted on in the House at this writing.
While there are similarities and overlaps between the bills, there are differences, too. Ultimately, Congress is expected to reconcile the trio of legislative initiatives and vote on a single, final bill.
It should be noted that retirement reform is a rare, bipartisan issue—and a hot one, too. That’s why action will likely be taken soon. For U.S. workers and businesses, it’s expected to be good news.
Fact: Workers Need Help Saving for Retirement
While some Americans are steadily saving for their retirement, others are not, which is likely to create hardship later.
According to the Federal Reserve’s most recent report of American’s economic well-being, 25% of nonretired adults have zero retirement savings.
And of those with retirement plans, only 40% believe that their savings are on track to meet their future needs.
The majority of Americans who are saving for retirement are doing so via their 401(k) and 403(b) plans—that’s how important employer-sponsored retirement savings plans are.
According to the U.S. Bureau of Labor Statistics, 72% of employers offer some form of retirement savings plan, but only 56% of eligible workers participate in them.
Furthermore, the BLS finds that, the lower an employee’s wages are, the less likely they are to participate. For example, just 19% of workers in the lowest 10% of earners participate in their company’s retirement plan, as opposed to 85% of the highest 10% of earners.
If the Secure Act 2.0 accomplishes its intended goal, it will raise those numbers across the board.
What Will the Secure Act 2.0 Likely Mandate?
Between them, the three bills lumped under Secure Act 2.0 include more than 80 provisions. While not all of them will make the final cut, it’s expected that the final Secure Act 2.0 will:
- Provide tax credits to small businesses for starting new employee retirement plans.
- Expand eligibility for part-time employees by shortening duration of service requirements.
- Raise the age limit for taking required minimum distributions from the current age of 72, allowing workers to accumulate more savings.
- Require that newly created retirement plans auto-enroll new, eligible employees (who can then elect to opt out).
- Increase the maximum amount of “catch-up” contributions that older workers can make, allowing them to save more for later in their work life.
- Help workers with student loans save for retirement by allowing employers to make matching retirement contributions on student loan payments. Although the student loan payments would be made to the lender, the matching funds would be deposited in the worker’s retirement account.
- Improve access to annuities as a retirement savings vehicle by relaxing current requirements.
- Loosen penalties on early withdrawals drawn to cover personal emergencies.
- Create a national database so Americans can locate lost retirement accounts.
In short, the Secure Act 2.0 will benefit workers—and the many employers that are committed to improving their employees’ long-term financial well-being.
That benefits everyone. Because when employees believe that their employer genuinely cares about their welfare, they’re not only more productive and creative, but more likely to stick around.
In other words, there’s good reason for employers to root for—and stay on top of—the Secure Act 2.0.
A rising tide lifts all boats.
