House Ways and Means Committee Chairman Richard E. Neal (D-MA) has long been a champion of legislative retirement reform efforts, so it’s no big surprise that topic is well-represented in a new report released this week designed to inform the Committee’s priorities for the 117th Congress.
The report, “Something Must Change: Inequities in U.S. Policy and Society,” provides key context on which members’ legislative priorities are based, and the framework, “A Bold Vision for a Legislative Path Toward Health and Economic Equity,” lays out pillars and policy priorities focused on achieving equity in health and the economy.
“There is no silver bullet to correct the inequities that are 400 years in the making and deeply ingrained in our systems, institutions, and laws. But we cannot allow the scope of these challenges to intimidate us,” Chairman Neal wrote in his foreword for the framework. “The framework we present here is Ways and Means Committee Democrats’ plan to make our nation a more just and equitable place. Some actions we can pursue almost immediately. Other advancements may take longer to become law. But inaction is not an option. Complacency cannot be tolerated.”
“Retirement Security” is one of the five Economic Equity Pillars laid out in the framework.
“Congress must do more to help American families, especially minority families, have a secure and dignified retirement,” the framework states. “Social Security provides the foundation of retirement security, and its benefits must be strengthened and improved, particularly for low-wage workers. Social Security disability benefits must be protected against harmful attacks. Beyond Social Security, families of color are far less likely to have retirement savings and access to employer-based retirement plans. Policies to remedy these inequities will help increase their savings for retirement.”
Specifically related to 401ks, the framework lists these priorities:
- Implement Automatic IRAs and 401ks; require automatic enrollment in 401k-type plans
- Adjust the new part-time workers in 401k plans provision to require only two years of service
- Make the Saver’s Credit refundable, and direct the U.S. Department of the Treasury to raise awareness of the credit, especially in minority communities
- Make it easier for military spouses to save within their employer retirement plans
- Ensure that small businesses can take full advantage of the start-up credit when participating in a multiple employer plan (MEP)
- Direct Treasury to provide education to small businesses about the advantages and availability of MEPs and groups of plans
Auto enrollment touted
The report notes that too few workers, especially worker of color, are offered the opportunity to save through an employer-sponsored retirement plan.
“For years, at least one out of every three American workers—an estimated 55 million—has been denied the choice to save for retirement using their employer’s payroll system because they lack access to an employer plan at their workplace,” the report says.
“Access to employer plans is critical, as very few save for retirement on their own in a non-employer-sponsored plan: In any given year, only roughly one out of 10 people eligible to contribute to an Individual Retirement Account (IRA) do so,” the report continues. “By contrast, approximately seven or eight out of 10 participate in employer plans, and about nine out of 10 participate in an employer plan using automatic enrollment.”
It went on to tout the benefits automatic enrollment in 401k plans, and how the feature has been shown to significantly increase participation and nearly eliminates the racial gap in participation rates.
The Securing a Strong Retirement Act, also known as SECURE 2.0 that was introduced last October by Neal and Rep. Kevin Brady (R-TX), includes a provision that would require most retirement plans to automatically enroll workers upon becoming eligible while giving employees the opportunity to opt out.
That bill is widely expected to be reintroduced in the 117th Congress.
SECURE 2.0 also includes a provision that would adjust the new part-time workers in 401k plans provision of the original 2019 SECURE Act to require only two years of service instead of three, and would also raise the age for required minimum distributions (RMDs) from age 72 to 75.
SEE ALSO:
- Senate Hearing Focuses On 4 Retirement Saving Challenges
- SECURE Act 2.0 Legislation Introduced—And Wow!
- Massive New Retirement Bill Would Expand, Mandate Auto-Enrollment
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
