A new bill introduced in the Senate Wednesday would permit 401(k) plan sponsors to automatically reenroll non-participants at least once every 3 years, unless the individual affirmatively opts out again.
Saying the legislation would assist American workers in taking advantage of their available retirement plans and full employer match, the Auto Reenroll Act of 2023, reintroduced by Sen. Bill Cassidy (R-LA), ranking member of the Senate HELP Committee; and Sen. Tim Kaine (D-VA), would modify safe harbors in ERISA and the Internal Revenue Code to permit automatic re-enrollment.
A similar bill was introduced in 2022 by Sen. Kaine and Rep. Kathy Manning (D-NC), but did not advance.
“With over half of all Americans are not on track for retirement and other safety nets like Social Security on track to go insolvent, we are in a retirement crisis,” Sen. Cassidy said. “Auto-reenrollment puts workers in the better position to prepare for retirement while staying in control of their financial decisions.”
“Many Americans have the option to enroll in employer-sponsored retirement plans, but they do not take advantage of this benefit and miss out on critical retirement contributions from their employers.”
Sen. Tim Kaine (D-VA)
A release announcing the bill’s introduction notes that some employees choose to not participate in their employer’s retirement plan or take advantage of the full employer match when starting out and making entry level wages. However, many forget to join or increase their contribution as they move up in income, leaving significant money on the table. The release cites Bureau of Labor Statistics data stating that only 75% of private sector workers who have access to employer-sponsored retirement plans participate. And one-third of employees are not taking advantage of their full employer matching contribution.
“Many Americans have the option to enroll in employer-sponsored retirement plans, but they do not take advantage of this benefit and miss out on critical retirement contributions from their employers,” Sen. Kaine said. “I’m proud to introduce this bipartisan bill to help more Americans take advantage of the retirement benefits offered to them and be on better financial footing.”
Retirement plans would be permitted to sweep as a group everyone who meets the requirements for reenrollment, rather than on each employee’s enrollment date, and need only provide this reenrollment opportunity to those who are not participating in the plan at all.
Recent research from Principal shows that over half (51%) of participants attributed auto-enrollment to kickstarting their retirement savings journey, and 81% said it helped them begin saving even sooner.
The legislation is supported by the American Benefits Council, Nationwide Retirement Solutions, and Fidelity Investments. The Insured Retirement Institute, which included auto-enrollment as one of its priorities in its 2023 Federal Retirement Blueprint, also supports the bill.
“Automatic enrollment is a valuable tool for increasing participation in workplace retirement savings plans, particularly for low-wage employees,” said IRI Chief Government and Political Affairs Officer Paul Richman. “Despite this, many workers still opt to not participate in their employer’s plan due to their financial situation at the time they are hired. The Automatic Reenroll Act will help to further expand participation in retirement savings by encouraging workers to reevaluate their situation as their careers progress.”
Read the text of the bill here.
SEE ALSO:
• Participants Admit Auto-Enrollment Kickstarts the Retirement Savings Journey
• IRI Wants Virtually All Employees Auto Enrolled into Retirement Plans
• ‘Auto Reenroll Act of 2022’ Seeks to Boost 401k Participation