SECURE Act’s Impact on Retirement Plans (So Far)

SECURE Act

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More employees than ever are eligible to participate in plans, nearly 93%, according to PSCA’s 64th Annual Survey data. It credits SECURE Act provisions likely allowing long-term, part-time employees to participate in plans. Nearly three-fourths of plans now allow salaried part-time employees to participate and nearly 70% allow hourly part-time employees to do so.

PSCA notes that “with increased eligibility comes increased plan participation and nearly 90% of eligible participants made contributions to the plan in 2020—a record for the survey, now in its sixty-fourth year. Plan designs are steadily moving beyond the automatic enrollment framework of the Pension Protection Act of 2006.”

Auto feature excellence

It found that more than a third of plans now have an auto-escalation cap greater than 10% of pay (a SECURE Act provision increased the QDIA cap from 10 to 15%). This, along with the fact that the most common default deferral rate is now 6% of pay, with 65% of plans now using a default rate more than three%, will significantly boost overall savings rates over time.

Seismic shift

“The pandemic seems to have accelerated the shift already seen to a more holistic approach to retirement and financial education,” PSCA writes. “At the same time, the remote environment challenged traditional administration and education methods, forcing a reliance on technology—the use of email, mobile apps, and webinars to provide plan education jumped significantly, and two-thirds of organizations are now using mobile technology to provide plan access and transactions.”

“Nearly 90% of eligible participants made contributions to the plan in 2020.”

PSCA’s 64th Annual Survey

There were negative indicators as well, it adds, and the impact of the pandemic can also be seen in the lower average company contributions, as well as a slight uptick in loans and withdrawals.

However, while the average company contribution slipped to 4.9% of pay, it was still higher than it was four years ago. And, though more than 90% of plans now allow hardship withdrawals (likely spurred by CARES Act provisions), only a small fraction—2.6% of participants—took one in 2020.   

Several other plan design features made gains in 2020 as well.

“Plan design changes can be slow to take hold, but the pandemic appears to have accelerated the pace of change in dramatic fashion,” Nevin Adams, chief content officer and head of retirement research at the American Retirement Association, said in a statement. “It’s encouraging to see a strong participant response to these enhanced plan designs—the combination is great news for the nation’s retirement security.” 

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