Despite the best efforts and threats against fellow Republicans of House Minority Leader Kevin McCarthy (R-CA), the House today passed the nearly $1.7 trillion “omnibus” spending bill to fund the government through most of next year—which of course includes the SECURE 2.0 Act of 2022.
The bill, H.R. 2617, passed in the House on Friday by a vote of 225-201 (one lawmaker voted “present”), with nine Republicans joining 216 Democrats while 200 House Republicans voted against the bill. The bill keeps doors open for federal agencies through Sept. 30, 2023, and now heads to President Joe Biden’s desk for his signature, considered a mere formality.
McCarthy, who is trying to secure enough Republican votes to become Speaker of the House next year when the GOP takes over the majority in the House, vowed to block House consideration of bills sponsored by GOP senators who voted for it.
Despite the threat, 18 Republican senators including Senate Minority Leader Mitch McConnell (R-KY) voted to pass the omnibus spending bill, including four who are retiring at the end of this session and 14 who will remain.
The last bill Democrats passed while controlling the House before Republicans take control of on Jan. 3 was considered in a mostly empty chamber, with more than 40% of members filing proxy letters allowing them to vote remotely as they scrambled to make it home in the midst of the nearly nationwide dangerous winter storms that are severely disrupting holiday travel.
The 4,155-page bill includes billions in defense spending, non-defense discretionary spending, and aid for Ukraine, among countless other provisions. But of course all eyes in the retirement industry were on the legislation because of its much-anticipated inclusion of the SECURE 2.0 Act of 2022, another landmark retirement reform bill meant to build on reforms included in the SECURE Act of 2019.
Earlier this week, the Bipartisan Policy Center released a detailed breakdown of SECURE 2.0 provisions, which can be accessed at this link. And for a closer look at SECURE 2.0’s emergency savings provisions, click here.
As the BPC analysis states, SECURE 2.0 provisions range from small technical corrections to significant policy changes. The legislation will expand participation and boost savings in workplace plans, extend support to small businesses trying to help their workers prepare for retirement, and ease access to lifetime income products. The package would also increase some tax incentives for the already economically secure. Notably, the bill increases the age at which one must begin taking RMDs from 72 to 75, phased in over 10 years.
Most of the SECURE 2.0 provisions are set to take effect in either 2024 or 2025. Here’s an abbreviated look at when some key provisions will become effective:
2024:
• Emergency savings
• Establishment of “Starter 401k” plans
• Student loan payments eligible for employer matching contributions
• Increasing auto portability
• Changes to SIMPLE plans
2025:
• Increases the limit on catch-up contributions
• Expanding auto-enrollment
• Establishment of “retirement savings lost & found
• Increased workplace plan participation for part-time workers
2027:
• Transform the existing Saver’s Credit into a Saver’s Match
What the retirement industry loves about SECURE 2.0
Statements from across the retirement industry came rolling in on Friday upon House passage of the spending bill including the SECURE 2.0 Act of 2022. Here is a sampling of those received by 2:45 p.m. EST Friday.
Investment Company Institute
Today, ICI President and CEO Eric Pan released the following statement after Congress passed the year-end spending bill, which includes the SECURE 2.0 Act of 2022:
“ICI thanks the members of the House and Senate for their commitment to Americans’ retirement security. We welcome the passage of this vital piece of bipartisan legislation, which will improve the long-term financial well-being of Americans across the country.
“Key provisions of this important bill include the promotion of automatic enrollment, which will lead to increased participation rates in 401k and 403b retirement savings plans. The bill will support people as they look to start saving earlier by allowing employees to receive matching contributions to their retirement accounts based on student loan payments. Additionally, the legislation will help expand pooled employer plans, giving additional opportunities for individuals to access savings tools, and build for a secure financial future.
“We are pleased to see provisions enhancing catch-up limits, and the three-year increase in the age at which required minimum distributions (RMDs) must begin, which will allow investments to grow for longer and give retirees more flexibility. We look forward to President Biden signing this bipartisan bill and further strengthening our nation’s retirement system.”
Fidelity Investments
Fidelity Investments issued the following statement from Kevin Barry, president of Workplace Investing, and Joanna Rotenberg, president of Personal Investing, upon congressional passage of SECURE 2.0:
“On behalf of our customers, Fidelity Investments applauds Congress for passing bipartisan legislation that will enhance America’s retirement system. SECURE 2.0 will integrate several important benefits that are critical to financial security and expand access to underrepresented communities. As one of the country’s leading workplace benefits providers and America’s No. 1 IRA provider, Fidelity is committed to supporting Americans as they save for and live in retirement and will be prepared to help customers take advantage of the opportunities that result from this new law.
“Of particular importance, the bill allows employers to make matching retirement contributions based on the amount an employee is paying toward their student loans, which will help many workers begin saving for retirement. It also includes needed reforms that gradually raise the RMD age to 75, expands pooled employer plans (PEPs), supports the adoption of emergency savings accounts, and promotes auto-portability.”
Vanguard
John James, Vanguard managing director and head of Vanguard Institutional Investor Group, issued the following statement commending the passage of SECURE 2.0:
“With the passage of SECURE 2.0, millions more Americans now have a better chance at retirement success. This landmark legislation makes it easier for participants to save for their future by broadening Americans’ access to the retirement savings system through expanded automatic enrollment and escalation, novel portability efforts that Vanguard helped pioneer, and greater transparency around target-date fund performance.
“On behalf of Vanguard’s more than 30 million investor-owners, we extend a heartfelt thank you to Congress for their bipartisan efforts to simplify retirement savings and help more Americans save for a secure retirement.
“We look forward to working with our plan sponsors and all Vanguard investors to implement these milestone provisions in the days to come.”
Empower
Empower released the following statement from President & CEO Edmund F. Murphy III:
“In the midst of the holiday season, Congress has delivered a great gift to American retirement savers by voting into law new improvements to the retirement system, known as SECURE 2.0. Empower applauds lawmakers for considering these big ideas and big changes to retirement planning.
“When signed into law by President Biden, these measures will have the potential to make it easier for more Americans to save for the retirement they deserve. We believe these changes will encourage retirement savings and help provide American workers with a more secure retirement.”
TIAA
“TIAA commends Congress for uniting on this vital legislation to improve Americans’ retirement outcomes and make a financially secure future more accessible for all. Access to retirement plans and opportunities to save more during working years are critical to delivering retirement security for millions of people. SECURE 2.0 will help strengthen Americans’ retirement readiness through provisions that will reduce barriers to annuitization, increase access to workplace retirement plans and improve opportunities to save for retirement,” said TIAA Chief Institutional Client Officer Kourtney Gibson.
“This significant, bipartisan progress would not have been possible without the steadfast leadership and vision of dedicated retirement champions in the House and the Senate,” Gibson added. “We look forward to working with Congress in the new year and building upon these important, foundational reforms to make a financially secure retirement attainable for all.”
Betterment at Work
Statement from Kristen Carlisle, General Manager, Betterment at Work:
“The passage of SECURE Act 2.0 is significant for American workers and businesses, and will drive a number of important changes to increase retirement security and access to savings mechanisms. One provision I’m particularly excited about is the ability for employers to match employee student debt payments with a 401k contribution. A recent survey Betterment at Work conducted found that two-thirds of employees felt their student debt has hindered their ability to save for retirement. The passage of the SECURE Act would allow employers to help address those two currently competing goals in tandem, echoing a rising hunger we’ve seen for student loan benefits among the employers and employees we work with.
“I’m also excited by the proposed expansion of automatic enrollment. We’ve seen firsthand that auto-enrollment and auto-escalation can lead to higher retirement savings and better financial outcomes for employees; what’s more, auto-enrollment benefits employers by increasing plan participation and helping companies avoid potential compliance complications down the line.
“Retirement security is a nationwide crisis: our survey’s findings were that only 52% of employees have access to a 401k, a number that drops to 39% for small business workers. What’s more, over a quarter (28%) of employees we surveyed were forced to dip into their retirement savings to pay for short-term expenses this year. All things considered, workers are facing a significant number of competing financial priorities right now but have a strong desire to save for retirement, so this legislation is coming at a critical moment.
“As we look forward, we must continue to think critically about the ways in which employers and employees can work together effectively to create a path towards retirement security for all. The financial needs of the American workforce are constantly shifting, meaning that legislation and workplace guidance must continue to evolve with them.”
Principal Financial Group
Principal Financial Group released the following statement from Chris Littlefield, President of Retirement and Income Solutions:
“This is a momentous time for the U.S. retirement industry with two major legislative reform bills being enacted within a three-year span. Just like the first SECURE Act in 2019, SECURE 2.0 will increase the access Americans have to retirement savings and enable more workers to start saving for retirement earlier in their lives.
“It is estimated that SECURE 2.0 will help generate approximately $40 billion in retirement savings for new participants over the next 10 years. That is what makes this legislation so meaningful. It will improve coverage and reduce savings gaps by—among other things—enrolling more workers into plans automatically, incenting more businesses with 100 or fewer employees to establish retirement plans, and providing matching contributions to eligible participants paying student loan debt. These are significant enhancements to help address barriers to strengthen financial security, especially for the underserved such as part-time workers, military spouses, and low-income individuals.
“Overall, SECURE 2.0 is another big step in a positive direction for our industry and I’m encouraged by the opportunities it creates to support individuals who want to confidently plan for a comfortable retirement.”
John Hancock Retirement
Jeff Kobs, head of the Business Consulting Group at John Hancock Retirement, provided the following statement:
“As one of the largest providers of retirement plans to small businesses, John Hancock Retirement applauds Congress for passing the SECURE Act 2.0 and its many benefits to expand retirement coverage for working Americans. We’re particularly pleased to see the provisions that make it easier for small businesses to offer plans that will not only help more Americans become more retirement-ready, but also help them create emergency savings and potentially even pay down student debt.”
Transamerica
Transamerica released the following LinkedIn post from Phil Eckman, President, Workplace Solutions: “Great news out of Washington! The passage of the SECURE 2.0 Act of 2022 is another step toward helping more people enjoy a financially secure future. Transamerica is particularly pleased to see provisions regarding auto enrollment, auto re-enrollment, and auto escalation. These plan design elements can help more hardworking Americans start saving sooner (and more) for retirement.”
The ERISA Industry Committee (ERIC)
The ERISA Industry Committee (ERIC) today hailed many health care and retirement benefits provisions included in the Consolidated Appropriations Act of 2023 (also known as the “Omnibus”) passed today by the U.S. House of Representatives and earlier this week by the U.S. Senate.
“We are pleased that Congress has supported on a bipartisan basis many of ERIC’s commonsense recommendations, which together will enable employers to enhance health care and retirement benefit plans for millions of employees, retirees, and their families. In particular, we are pleased that the legislation eases administrative burdens, reduces costs, improves access to quality health care, and supports increased retirement savings and support for student loans and emergency savings. These health care provisions and SECURE 2.0 Act of 2022 are significant wins for employers, employees, and retirees,” said James Gelfand, ERIC President.
“The millions of workers, retirees, and families that receive benefits from ERIC’s large employer member companies will benefit from this legislation, and ERIC thanks the policymakers that championed these important reforms,” said Gelfand. “Because our member companies continue to design and provide innovative benefits tailored to meet the needs of their workforces, ERIC looks forward to working with the 118th Congress and federal regulators on additional measures that will improve access to high quality, affordable health care, no matter where someone lives or works, and to foster improved employee wellbeing and financial security.”
American Council of Life Insurers
American Council of Life Insurers (ACLI) President & CEO Susan Neely made the following comments today on “SECURE 2.0” and the Registration for Index-Linked Annuities (RILA) Act, retirement security measures Congress approved today as part of the 2023 spending package:
“Members of Congress today made a real difference in the lives of millions of workers in need of a pathway to retirement savings.
“Legislation included in the 2023 omnibus spending package addresses gaps that have left some people on the sidelines of retirement savings, unable to access the workplace retirement plans that do so much good in establishing the capability and habit of savings. Part-time workers, military spouses, small business employees, and student loan borrowers are just a few who will benefit and have a better chance of positioning themselves for a more financially secure retirement as a result of Congress’s action today.”
Aon
Aon on Friday released the following comment from Partner Melissa Elbert:
“While this legislation can benefit employers and employees alike, it is notable how SECURE 2.0 will impact employers with a focus on supporting DEI goals. Namely, the provisions regarding student loans and part-time workers will disproportionately benefit women and diverse populations. Women are more likely to have student debt and be employed part-time, so these provisions can be a direct step to lessen the gender gap in retirement income, though there is still plenty of work to be done.
“Additionally, we are also optimistic about what this can mean for the expanded adoption of pooled employer plans (PEPs). We have already seen how PEPs can provide significant savings for participants and ultimately improve their retirement outcomes while also easing the burden of plan management for employers. The PEP model is more efficient for everyone.”
Goldman Sachs Ayco Personal Financial Management
Goldman Sachs Ayco Personal Financial Management released the following statement from Greg Wilson, Partner and Head of Institutional Client Business:
“The Secure Act 2.0 will help Americans better prepare for a comfortable retirement. Our research shows that a growing number of retirement savers face a vortex of unique and significant financial challenges throughout their working years that can derail their retirement savings. Provisions in the SECURE Act 2.0, which range from expanding automatic enrollment for employees joining 401k and 403b plans, to allowing employers to make matching contributions based on qualified student loan payments, and reducing the eligibility requirement for part-time workers to join 401k plans, are key changes that can help working Americans overcome expected and unexpected obstacles to saving.”
SEE ALSO:
• Senate Passes $1.7T Spending Bill Containing SECURE 2.0—Now On to the House
• How SECURE 2.0 Validates Emergency Savings Initiatives
• It’s In! SECURE 2.0 Act of 2022 Included in Omnibus Appropriations Bill
• NIRS Applauds SECURE 2.0, But Stresses More Needs to be Done
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.