U.S. Senators Tim Kaine (D-VA) and Bill Cassidy (R-LA) today introduced legislation that would encourage automatic enrollment in employer-sponsored retirement plans and usage of employer matches.
The Auto Reenroll Act would amend safe harbors seen in the Employee Retirement Income Security (ERISA) Act to allow plan sponsors to reenroll non-participants at least once every three years, unless the employee opts out again.
“Americans should have every opportunity to invest for a secure retirement,” said Sen. Cassidy. “Auto-reenrollment enables workers to be in better control of their finances so they can be ready for retirement.”
Research from the U.S. Bureau of Labor Statistics (BLS) finds that one in four American workers are currently not enrolled in their employer-sponsored retirement plans, and one-third do not take full advantage of their employer matches.
Employees who work entry-level roles may choose to opt out of their plan in an effort to save money. By permitting plan sponsors to allow reenrolls, they can proactively encourage their workers to enroll after a promotion or raise.
Further, some may not realize they were never enrolled into their workplace plan in the first place. Enacting this legislation could minimize that oversight.
Studies show the vast impact of automatic enrollment features on participants’ retirement savings. A March brief by the Employee Benefit Research Institute (EBRI) found that participants enrolled in plans with an auto-enrollment rate of 6% and who have auto-escalation and auto-portability features are likelier to avoid running short of money in retirement.
“For many Americans, employer-sponsored retirement plans become a crucial part of their long-term financial security,” said Sen. Kaine. “That’s why it’s important that we make it easier for more workers to take full advantage of these opportunities.”
The bipartisan legislation has since been endorsed by AARP, the American Benefits Council, American Retirement Association, BPC Action, Edward Jones, Empower, LPL Financial, Nationwide Retirement Solutions, and Transamerica.
A copy of the bill can be found here.
SEE ALSO:
EBRI Analysis Tool Highlights Impacts of Automatic Enrollment
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.