There are several potential benefits to the retirement landscape in the United States that could come from the passage of the Securing a Strong Retirement Act of 2022 (SECURE 2.0), including getting more workers involved in actively saving for retirement and reducing risk for workers broadly as time goes on. These are some of the perspectives shared by Automatic Data Processing, Inc. (ADP), a human resources company and one of the largest payroll providers in the U.S.
“As Congress gets back to business this fall to finalize the bill’s specifics, here’s a brief recap of the likely changes to company retirement plan requirements — and their benefits to employees and employers alike,” the piece reads. “The Senate is also working on provisions that will also be considered alongside the SECURE 2.0 Act.”
For employers, the passage of the bill has the potential to reduce their costs and administrative burdens by providing a larger tax credit for small businesses, streamlining certain administrative requirements, and consolidate multiple notices into a single document.
“The new legislation has provisions to cut down on the paperwork required of plan sponsors and reduce penalties for certain reporting errors,” the post reads. “Within two years of the bill’s passage, the U.S. Treasury and Department of Labor would require plans to consolidate multiple participant notices into a single document.”
The bill will also have the potential to increase the enrollment of more workers into active retirement plans, which could have a major impact on their ability to save money for later life.
“[SECURE 2.0] requires automatic enrollment for certain employers with 401(k) or 403(b) plans. Employees would have the choice to opt out of enrollment,” the post reads.
It will also boost catch-up limits for employees between the ages of 62 and 64, and “allows employers to match student loan payments, (up to a certain percentage of the employee’s salary), and deposit the funds in their retirement account,” it says.
Retirement plans in general could also be strengthened if the bill is ultimately signed into law by President Biden, the post suggests.
“Several SECURE Act 2.0 provisions are designed to improve across-the-board plan effectiveness, such as improving access to annuities as a retirement savings vehicle by relaxing requirements on required minimum distributions (RMDs),” it reads. “In addition, the Senate Finance Committee has formally introduced the Enhancing American Retirement Now (EARN) Act. With 70+ provisions, the EARN Act is also focused on helping small businesses offer plans and making it easier for employees to save.”
The Bipartisan Policy Center (BPC) also took a closer look at some of the provisions found in SECURE 2.0, saying in part that increasing the use of automatic enrollment and automatic escalation would “amplify the benefits of expanding access to retirement plans,” BPC said this month. “Notably, only the House version of SECURE 2.0 currently includes the most impactful of such provisions, requiring most new retirement plans to automatically enroll eligible participants and automatically increase contributions by one percentage point (up to 10% of wages) annually.”
Read the post at ADP.
