SECURE Act 2.0: What it will mean for your company’s retirement plan

Retirement policy experts are optimistic that Congress will past SECURE 2.0 legislation – which will make it easier to workers to prepare for retirement – by the end of this year.

“I would say there is a 50% to 60% likelihood that it will pass,” said Jill Brown, director of government relations for TIAA. “There is a ton of momentum to get this to happen this year. But if it does happen, it’s very likely that final passage would be toward the end of the year, because it’s likely to pass as part of a post-election bill that looks to clean up a lot of outstanding issues before a new Congress begins in January.”

Brown shared her insights during a September 15 webinar sponsored by TIAA, which provides guaranteed retirement income and life insurance to educators.

SECURE 2.0 is not a single piece of legislation but an umbrella term for several bills currently  moving through Congress. In March, the House passed the Securing a Strong Retirement Act of 2022, which is designed to build upon the SECURE Act of 2019.. In June, the Senate approved two bills, the Enhancing American Retirement Now Act and the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act.

Related: IRS extends retirement amendment deadlines for SECURE, CARES Acts

These three bills represent the basis for the proposed retirement reform commonly known as SECURE Act 2.0. Although there are similarities between the House-approved bill and the Senate bills, there also are differences. The three bills still must be reconciled before a vote on the final bill, which would go to President Biden for his signature.

“Change is the only constant in D.C., and there have been a lot of them through the process,” Brown said. “One thing that is constant, though, is that retirement is a bright spot for bipartisanship. It’s a bread-and-butter issue that is important to people, and it’s a good opportunity for Congress to address the pitfalls they face.”

The objective is to find revenue-neutral ways of plugging the gaps in the current retirement system. “The first is the guarantee gap,” she said. “Many Americans are saving, but those without access to lifetime income realistically can outlive their next egg. Similarly, there is a savings gap. Many workers are doing the right thing and doing their best by saving in an employer-sponsored plan but often are not saving enough to last 20, 30 or more years into retirement. Last, there is the access gap, which is getting more workers covered by employer-sponsored plans, because we know how well they work. SECURE 2.0 is the latest version of retirement legislation being considered, and it checks all of the boxes.”

The bills under consideration have more than 80 provisions – such as higher catch-up contributions for participants at age 60 and expanding automatic enrollment in employer-sponsored plans – and it’s unlikely that all of them will be included in the final legislation. The most significant provisions fall in the categories of expanded access and additional investment options, increased savings and income preservation, and simpler plan administration.

“It’s hard to say which provisions will survive, but I think the ones that are in both the House and the Senate versions probably will,” Brown said. “It has to be a revenue-neutral bill that cannot cost taxpayers money. Any provisions that have a high cost associated with them may be looked at again and be tweaked.”

Although the numerous provisions may seem daunting, employers should have adequate time to prepare. “The concept is that SECURE Act 2.0 is not designed to be a big bang but a slow roll,” said Jennifer Crowe, senior director of institutional product consulting for TIAA, who also spoke on the webinar. “You will have quite some time to make whatever updates you need to make to your plan documents.”

TIAA offered these takeaway messages:

• Some provisions have conflicting requirements across the House and Senate bill versions.
• Additional bill consolidation needs to happen to get to the final provision list.
• The effective dates for each provision will vary.
• Consider impacts to plan design and be prepared for operational impacts, keeping in mind that some provisions are mandatory and others are optional
• Think about the communication strategy for participants. Do they understand what the regulation means and the benefits?

“When you step back and look at all of these provisions, it’s clear that Congress is absolutely trying to help different segments of your employee population,” Crowe said. “Some provisions will be mandatory and some will be optional, but a lot of it boils down to knowing your employee population. It’s about identifying which of these provisions will be important to your employees and which of them you could support.“