A bill that would encourage retirement plans to automatically reenroll workers was introduced in Congress on Friday by Senator Tim Kaine (D-VA), a member of the Senate Health, Education, Labor, & Pensions (HELP) Committee, and Rep. Kathy Manning (D-NC).
The bicameral Auto Reenroll Act of 2022 seeks to increase workers’ participation in employer-sponsored retirement plans by encouraging retirement plans to automatically reenroll workers in these plans, with the option to opt out.
Many employers automatically enroll their employees in retirement savings plans when they start the job, but many employees initially decide to opt out. The bill would prompt those who opt out of a retirement savings plan to reconsider their choice every three years as their career progresses and financial situation changes. A press release announcing the bill said this would lead to more workers benefiting from employer matches during their careers.
“Employer-sponsored retirement plans are an important part of retirement for millions of Americans. However, far too many workers are missing out on money that can go a long way toward financial stability in their retirement years by failing to participate in their employer matching contribution,” Senator Kaine said. “This common-sense legislation will build on the success of auto-enrollment and help put families in Virginia and across the nation on a safer financial footing for the future.”
“Nearly half of all private sector workers are missing out on the benefits of their employer-sponsored retirement plan and employer matching contributions. The years that employees are working without earning these savings could have a large impact on their retirement,” Congresswoman Manning said. “I introduced this bill with Senator Kaine to ensure that all Americans are getting their earned benefits while saving for their futures.”
Employer-sponsored retirement plans are a vital part of retirement security for Americans, supplementing Social Security and other sources of retirement income. However, only 51 percent of private sector workers participate in employer-sponsored retirement plans. Millions of workers have access to these plans but do not participate, often leaving employer matching contributions on the table—not only saving less than they could, but also not receiving the full compensation to which they are entitled. Many Americans who do not sign up for retirement plans when they start with their employer never reconsider that decision, even if their financial situation changes, contributing to an estimated 17.5 million Americans leaving free retirement funds on the table. By encouraging automatic re-enrollment, this legislation would help address that issue.
Specifically, the Auto Reenroll Act of 2022 would enhance automatic enrollment plans by amending safe harbors in the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code) to encourage plan sponsors to re-enroll non-participants at least once every three years, unless the individual affirmatively opts out again.
If the bill advances and becomes law during the 117th Congress, it would take effect after Dec. 31, 2024.
To read the bill text, click here.
SEE ALSO:
• New Data Further Showcases Power of Auto Enrollment
• Employer Contributions Now Widespread in 401k Plans
• Bill Allowing Annuities as QDIAs in 401ks Introduced in House