House passes SECURE 2.0, Senate version coming soon

As the House passed the Securing a Strong Retirement Act on Tuesday, its version of bipartisan legislation designed to improve the retirement benefit and savings system, a Senate version is waiting in the wings.  

The House passed “Secure 2.0” 414-5. The measure gradually increases the age for taking mandatory distributions from 401(k) plans or IRAs from 72 to 75. It also would encourage more employers to start offering retirement plans and to automatically enroll more employees. Other provisions include the following:

• allowing employers to match workers’ student loan repayments with retirement account contributions
• allowing workers access to more annuity options
• increasing the small business pension plan startup credit
• allowing 403(b) plans to invest in collective investment trusts
• allowing pooled employer plans to designate a named fiduciary other than the employer
• establishing a retirement savings “lost and found” 
• additional provisions including those designed to help firefighters, first responders, military spouses, and part-time workers

Senate Health, Education, Labor and Pensions Committee Chairman Sen. Patty Murray, D-Wash., said she intends to introduce her version of the legislation in the Senate in the coming weeks.

She said she is working on the bill with her committee’s ranking Republican, Sen. Richard Burr of North Carolina. 

“Ranking Member Burr and I are working now to pull together bipartisan ideas in this space, and move a retirement legislative package later this spring, Murray said, as she opened a hearing, also on Tuesday, intended to hear additional suggestions about what could be in the bill.

The retirement savings system is in dire need of an overhaul, Ida Rademacher, vice president and executive director of the Financial Security Program at the Aspen Institute, told the Senate committee.

“Unfortunately, despite the power of the retirement savings system for those who are able to use it, there is also broad agreement that it has not yet lived up to its potential for everyone,” she said, in her testimony.

She said that there are wide gaps in access to effective retirements savings tools. The situation is particularly serious in households of color, women, and low-income people, she added.

She said that increasing coverage must be a priority and that it must include automatic enrollment. She also said that the market for Multiple Employer Plans or Pooled Employer plans should be expanded to include more workers.

Rademacher and other witnesses told the Senate committee that the coronavirus pandemic has demonstrated the need for families to be able to withdraw money from their retirement accounts in the event of financial emergencies.

“Emergency savings are foundational building blocks for the unbanked and for moderate and low-income women as well as for many employees who are willing to agree that they want to enroll in a workplace ‘rainy day’ emergency savings program with payroll deduction if offered by their employer,” Cindy Hounsell, president of the Women’s Institute for a Secure Retirement told the panel.

The absence of guaranteed income options hinders efforts to provide employees with secure income when they retire, Doug Chittenden, senior vice president and head of client relationships at TIAA told the committee.

He said that guaranteed income options address “both the need to accumulate assets and the need to ensure those assets last throughout retirement.”