May 2021 was a particularly remarkable month for retirement reform legislation, with no less than eight bills being introduced (or reintroduced) in the House and Senate—with many of them enjoying bipartisan support and solid chances of becoming law.
Indeed, commonsense retirement reform seems to be just about the only thing lawmakers on both sides of the aisle can agree on right now, which partially explains the recent influx of new retirement-related bills. Momentum has been building all Spring for the next major package of reforms that will build on 2019’s SECURE Act—which was the most significant retirement reform legislation since the Pension Protection Act of 2006.
“SECURE 2.0,” as it is frequently referred to, figures to combine many elements from different (but often very similar) bills in the House and Senate, and many industry experts are predicting SECURE 2.0 could cruise down Capitol Hill and into the Oval Office for President Joe Biden’s signature before the end of this year.
A pair of bills focus on expanding ESG investing options for 401k participants, and two more seek to ban investment in Chinese companies by the federal government’s Thrift Savings Plan.
Securing a Strong Retirement Act of 2021
The Securing a Strong Retirement Act of 2021 was introduced May 4 by House Ways and Means Committee Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX).
This wide-ranging bill, along with companion Senate bill (also profiled in this article) the Retirement Security and Savings Act, figures to make up the vast majority of SECURE 2.0.
Among its provisions:
- Expanding auto–enrollment, auto-escalation
Section 101 requires 401(k) and 403(b) plans to automatically enroll participants in the plans upon becoming eligible (and the employees may opt out of coverage). The initial automatic enrollment amount is at least 3% but no more than 10%. And then each year that amount is increased by 1% until reaching 10%. There are some exceptions.
- Raising the RMD age from 72 to 75
The original SECURE Act raised the age for taking required minimum distributions from 401ks and traditional IRAs from age 70½ to 72; this bill would raise it further to age 75 by 2032 (if the bill passes this year).
- Matching 401k contributions for student loan payments
Another provision would allow individuals to pay down a student loan instead of contributing to a 401k plan and still receive an employer match in their retirement plan.
- Some additional provisions
Provide incentives for small businesses to offer plans; allow for bigger catch-up contributions; increase and modernize the existing federal tax credit for contributions to a retirement plan or IRA (the Saver’s Credit); allowing MEPs for non-profits; create a national online database of lost 401k accounts.
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Retirement Security and Savings Act
The Retirement Security and Savings Act was introduced May 20 by Sens. Rob Portman, (R-OH) and Ben Cardin (D-MD). It is widely considered as the companion bill in the Senate to Neal and Brady’s Securing a Strong Retirement Act in the House, with many overlapping provisions. Again, any SECURE 2.0 package passing Congress would likely be made up substantially of the content in these two bills.
Per a news release from Portman, the bill addresses four major opportunities in the existing retirement system: (1) allowing people who have saved too little to set more aside for their retirement; (2) helping small businesses offer 401(k)s and other retirement plans; (3) expanding access to retirement savings plans, including for low-income Americans without coverage; and (4) providing more certainty and flexibility during Americans’ retirement years. The measure includes more than 50 provisions to accomplish these objectives.
More coverage:
- Final Piece of ‘SECURE 2.0’ Puzzle Reintroduced by Portman and Cardin
- Portman’s Push for a SECURE Retirement
The Improving Access to Retirement Savings Act
The Improving Access to Retirement Savings Act was introduced May 19 by Sens. Chuck Grassley (R-IA), Maggie Hassan (D-NH), and James Lankford (R-OK).
This bill would build off the successful implementation of the SECURE Act and make improvements so that more organizations and small businesses can participate in multiple employer plans (MEPs). Specifically, it would allow more groups to participate in MEPs by allowing 403b plans to participate. It also clarifies that small employers that join a MEP may take the small employer pension plan start-up credit for their first three years in a MEP, regardless of how long the MEP has been in existence.
With similar provisions included in Neal and Brady’s Securing a Strong Retirement Act, the prospects for allowing 403b plans to offer MEPs making it into SECURE 2.0 appear strong.
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Retirement Savings Lost and Found Act
The Retirement Savings Lost and Found Act was introduced May 21 by Sens. Elizabeth Warren (D-MA) and Steve Daines (R-MT).
In this reintroduced bill, Warren and Daines envision establishing a federal registry for retirement savings accounts held by terminated employees, alongside a small, but important “repository of last resort” for lost, uncashed retirement distribution checks.
Like the Warren-Daines bill, draft versions of SECURE 2.0 from both the House and Senate establish a Lost & Found that houses a central registry for former employees. However, says Thomas Hawkins of Retirement Clearinghouse in a recent article on 401k Specialist, that’s where the similarities end.
“Whereas Warren-Daines identified the U.S. Treasury as the federal agency operating the Lost & Found, SECURE 2.0 would place the new unit in the Pension Benefit Guaranty Corporation (PBGC). Much more significantly, SECURE 2.0 would massively expand the scope of the Lost & Found by requiring that plan sponsors effectively transfer all sub-$1,000 balances of terminated participants who simply fail to respond to a notification, or alternatively, fail to cash a distribution check,” Hawkins writes.
“In summary, the measure would require enormous taxpayer expense to create and operate a centralized warehouse of micro accounts, yet it would not discourage participant cashout behaviors, it would not promote consolidation of retirement savings, nor would it reduce the incidence of uncashed checks.”
“For these reasons, I strongly encourage Congress to reconsider these provisions of SECURE 2.0.”
It remains to be seen whether the SECURE 2.0 package will include or amend provisions regarding the establishment of a federal “Lost & Found” registry.
More coverage:
- The Strong Case for a Retirement Savings ‘Lost and Found’
- More Than a Trillion Dollars Stuck in ‘Forgotten’ 401ks
Financial Factors in Selecting Retirement Plan Investment Act
The Financial Factors in Selecting Retirement Plan Investment Act was introduced on May 20, sponsored by Sens. Tina Smith, (D-MN) and Patty Murray (D-WA), and Rep. Suzan DelBene (D-WA).
The Financial Factors in Selecting Retirement Plan Investment Act seeks to provide legal certainty to plans that choose to consider ESG factors in their investment decisions or offer ESG investment options to plan participants.
Per a bill summary from Smith, the Financial Factors in Selecting Retirement Plan Investments Act would:
- Amend ERISA to make clear that plans may consider ESG factors in their investment decisions when they are expected to have an impact on investment outcomes, provided plans consider them in a prudent manner consistent with their fiduciary obligations. This is the same legal standard that ERISA already applies to non-ESG investment factors a plan would typically consider
- Amend ERISA to codify a longstanding principle that plans may consider ESG factors as tie-breakers when deciding between otherwise comparable options. The tie-breaker rule existed in DOL guidance or regulation for decades, in varying forms, until being largely repealed by the Department of Labor last year
- Formally repeal last year’s Department of Labor rule on ESG investing, and limit future regulatory actions that impose unfair regulatory burdens in an effort to discourage ESG investing by ERISA plans.
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Retirees Sustainable Investment Opportunities Act
The Retirees Sustainable Investment Opportunities Act was introduced in the House May 27 by Andy Levin (D-MI), Brendan Boyle (D-PA), Cindy Axne (D-IA), Jesús “Chuy” García (D-IL), along with a related bill called the Sustainable Investment Policies Act.
Together, the bills would give workers a bigger say in where they invest their retirement savings by requiring large asset managers and plan investors and fiduciaries to take into account and explain to beneficiaries how they consider environmental, social and corporate governance (ESG) factors when making investment decisions.
Both were originally introduced last December, essentially seeking to do the opposite of the Department of Labor’s Trump-era ESG rule obstructing investments that consider ESG factors, which in March the DOL under the Biden administration decided not to enforce.
Like the Financial Factors in Selecting Retirement Plan Investment Act, the bill has no Republican sponsors, making its prospects for serious consideration this year more daunting.
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Prohibiting TSP Investment in China Act
The Prohibiting TSP Investment in China Act would prevent the federal government’s Thrift Savings Plan (TSP) from investing in any security of a Chinese company,” according to a news release from Sen. Tommy Tuberville, (R-AL), who introduced the bill on May 18.
This bill would prohibit TSP funds from being invested in any entity based in the People’s Republic of China (PRC), and “by cutting off a multi-billion-dollar investment stream, send a message of zero tolerance towards Chinese aggression and financial manipulation,” Tuberville’s statement announcing the bill said.
The TSP is the predominant government retirement fund and is utilized by 6,000,000 military members and federal civilian employees.
Congressman Jim Banks (R-IN) plans to introduce the companion bill in the U.S. House of Representatives.
More coverage:
- Lawmaker Blasts Trump Administration’s ‘Unprecedented Interference’ in TSP Operations
- Trump Squashes TSP Plan to Invest in China
- TSP Still Investing in ‘Shady’ Chinese Companies
Taxpayers and Savers Protection Act
The Taxpayers and Savers Protection Act, which would conditionally ban the investment of Thrift Savings Plan funds in securities listed on Chinese exchanges, was introduced May 20 by Sens. Marco Rubio (R-FL), Jeanne Shaheen (D-NH), Todd Young (R-IN), Rick Scott (R-FL), and Joni Ernst (R-IA).
Rep. Mike Waltz (R-FL) introduced a companion bill in the House May 25, and the Taxpayers and Savers Protection Act is similar in scope to Tuberville’s previously mentioned bill.
The bills would prohibit investment in issuers listed on foreign securities exchanges where the U.S. Public Company Accounting and Oversight Board has not issued an audit inspection and where the PCAOB is prevented from conducting such inspections.
“It is absolutely unacceptable that the Chinese Communist Party and government continues to profit from the retirement accounts of U.S. government employees and members of the military,” Rubio said in a news release. “Congress can’t sit on the sidelines and allow the TSP board to fund Beijing’s rise at the expense of our nation’s future prosperity and national security interests.”
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