Your 401(k) plan re-imagined: How tech plays a role (now that SECURE 2.0 has passed)

Recently, Congress passed Secure Act 2.0, a sweeping bill that introduced new protocols to improve retirement savings. One of the only bipartisan bills in the House and Senate, it will have major impacts that ensure more people have a healthy retirement nest. And while companies have been anticipating these new measures for some time, implementing them seamlessly will be resource intensive.

The changes outlined in the Act are robust, but the main headline is that it will increase the number of employees that are eligible for employer-sponsored retirement plans, expand automatic enrollment and other incentives towards saving for retirement, and bring guidance for employers to broaden plan offerings. Now, both employers and providers will need to make adjustments quickly in order to maximize positive impact. 

Employer-sponsored retirement plans: the must-have employee benefit

Retirement savings is not a zero-sum game. At its core, an employer-sponsored retirement plan is a benefit that organizations offer to attract and retain employees—it helps the business, as well as the workers. This Act expands guidance for employers and, in turn, encourages them to be more confident and more generous in what they offer because now they’ll be able to do the right thing and do it the right way. It also adds flexibility for both the plan sponsor and participants and allows those new features to be tied to additional benefits, such as increased contribution limits, additional tax benefits, and other types of support provided to employees in the workplace.

One of the other major benefits of the act, which will drive more adoption, is the significant expansion of pooled types of plan arrangements, multiple employer plans (MEPs) and pooled employer plans (PEPs). This not only gives employers more incentive to offer retirement plans, it will also help providers maximize the impact they can make for companies. There are also new advantages in the bill geared towards helping smaller companies administer plans to a smaller pool of employees.

As retirement plans continue to become more competitive – and attractive – more workers will demand them. These participant-level benefits will appeal to employers who want to recruit and retain the best workers in a highly competitive job market. With Secure Act 2.0, companies can even offer a prize for enrolling. This has a cumulative effect as it helps to build knowledge and understanding of plans over time.

The moment the insurance industry has been waiting for

After months (and in some cases, years) of watching, anticipating, and planning for what’s to come with the SECURE Act 2.0, providers are ready to execute. With the bill signed into law, providers need to help companies implement these changes as soon as possible.

Related: SECURE 2.0: Guidance for retirement plan sponsors for 2023, 2024 and beyond

The race is on to make sure that every provider is equipped with updated infrastructure to accept an expanding offering of plans, in addition to millions of new people enrolling. While it sounds daunting, this is ultimately a good thing because it means more people will have access to life-changing retirement savings. It’s what makes the insurance industry so exciting: we are open to change if it means increased access and opportunity for others.

There’s also never been a better time to adapt to these changes, because there is an inertia in this space that is fueled by technological innovation. Companies can now rely on more data and automation to speed up deployments, ensure compliance, and move the industry towards hyper personalization. New features in AI can help automate some of the infrastructure building to account for new changes, and it can even help customize plans based on different criteria, such as state mandates. All in, technology enables providers to move quickly while requiring fewer resources because they no longer are forced to update all of this information manually.

As a tech company with deep roots in the insurance space, we have a role to play in making the evolution faster, and helping to ensure better results for the retirement industry, for employers, and for employees. The Secure Act 2.0 is a positive movement for the insurance industry, but the actual results of the bill would not be possible without the hard work of retirement plan service providers, third party administrators (TPAs), broker-dealer firms, investment and asset management firms, advisors, consultants, and educators who make it all possible.

Bruce Corcoran is Head of Life and Retirement at Coherent.