The Women’s Retirement Protection Act: What employers need to know

With the United States’ Global Pension Index grade still sitting at a C+ in Mercer CFA Institute’s annual report, finding ways to ensure the population is prepared for a comfortable, financially stable retirement is clearly weighing heavily on leaders’ minds. The realization that millions of Americans—about half of the working population—have been unable to set adequate funds aside for their post-working years has led to a spate of federal and regional legislation in recent years.

We talked with Zach Keep, manager of compliance risk at Paychex, Inc. about how employers educate employees about their retirement.  Zach has been involved in the retirement industry for more than 15 years and has extensive experience navigating compliance issues for 403(b) and 401(k) plans. In his current role, Zach was closely involved with the rollout of the Paychex Pooled Employer Plan (PEP).

We asked Zach about changes in the retirement industry, and specifically about what employers should know about the Women’s Retirement Protection Act (WRPA), which can help bridge the gap between male and female employees.

Q. Can you explain the changes that have occurred nationally over the past few years?

A. The 2019 Setting Up Every Community for Retirement Enhancement (SECURE) Act kicked off a flurry of retirement program design and requirements adjustments. SECURE and its successor, SECURE 2.0, strengthened regulations and social programs to make saving for the future more accessible to workers. State and local legislators also undertook their efforts to outline provisions that safeguard constituents’ futures.

Then, in 2023, the Women’s Retirement Protection Act (WRPA) took center stage after being shelved back in 2019. This proposed bill aims to address inequalities and help women save for their futures and safeguard their accumulated assets.

Q. Walk us through the WRPA. What is it all about?

A. The WRPA is intended to help bridge the gap between male- and female-identifying retirees. Though we’ve made progress in closing the wage gap, the retirement gap has continued to grow. A 2020 report found that the average median household retirement income for women 65 and older in 2016 was just 83% that of their male counterparts. Today, female-identifying retirees (65+) earn just 56% of (about $23,000 less than) the average retired man’s annual income each year.

The reasons for this disparity are complex and interconnected. To start, female employees still earn just $0.84 for every dollar made by their male peers; there is simply less available for women to save throughout their working lives. However, other inequities exacerbate this issue, and it’s those problems that the WPRA aims to remedy. It does so by:

1. Strengthening consumer protections on 401(k) accounts. Retirement accounts—often among the biggest assets many married couples have to their names—are considered marital property, which means they may be contestable during the division of assets that often accompanies divorce, even if the entire account resulted from a single partner’s contributions throughout their working life. Currently, 401(k) plans do not require spousal consent or knowledge for one party to request a distribution of retirement plan assets.  The WRPA proposes adjusting existing 401(k) account distribution rules, requiring both parties to consent to withdrawals, transfers, and disbursements. It also extends certain protections that apply to federal plans like the Thrift Savings Plan to private, employer-sponsored retirement programs. This change is intended to help women feel secure when going through—and initiating—divorce proceedings. Interestingly, the provision has sparked many conversations in the industry, with some arguing that it might actually erode financial flexibility for the people it seeks to protect.
2. Increasing financial literacy. The WRPA aims to improve financial literacy through two provisions. The first is making new Labor Department grants available to established community-based organizations so they can develop and promote educational programs designed to address the needs of women in their areas. The bill also requires providers of financial planning products to address retirement planning in their sales and promotional materials by linking to the publicly available resources provided by the Consumer Financial Protection Bureau.
3. Supporting low-income individuals and domestic abuse survivors in planning for retirement. Finally, the bill recognizes that a financial aspect often accompanies domestic abuse, making it even more difficult for people experiencing violence at home to plan for the future—and to leave their situations. Qualified domestic relations orders (QDROs), which can be granted by state agencies, help individuals guarantee their right to alimony, benefits, child support, and other financial agreements owed to them by a domestic partner. However, navigating the system and securing these orders can be complex, especially for those without intimate knowledge of the legal system. To increase survivors’ access to these legal protections, the WRPA outlines new grants for community-based organizations that help low-income individuals and domestic abuse survivors seeking QDROs throughout the process.

Related: Could a whole new government-backed program close the retirement savings gap?

Q. Why is it important that employers understand the WRPA and other similar legislation?

A. While this bill will have little effect on employers’ processes, it’s essential for leaders and HR professionals to keep up with any regulatory changes that may affect workers. It’s also a good reminder about the importance of educating employees about the terms of their retirement and benefits programs regularly and providing information about the impacts that life changes—whether it is a divorce, a death in the family, the birth or adoption of a child, or a new diagnosis—may have on their benefits.