All 401(k) plan stakeholders should embrace SECURE 2.0: Treasury's 'inclusion’ report
“The National Strategy for Financial Inclusion” report leans heavily on the Treasury working to implement SECURE 2.0 provisions, such as Saver’s Match, emergency savings programs and auto-enrollment.
On Tuesday, the Department of the Treasury released the results of a project commissioned by Congress to advise a strategy to “advance consumer access to safe financial products and services” and increase ownership of retirement saving initiatives in the SECURE Act 2.0, such as auto-enrollment.
Treasury’s report, the “National Strategy for Financial Inclusion in the United States: Fostering Financial Access, Resilience, and Well-Being for All,” included five areas of focus, along with sample initiatives to improve each:
- Promote access to transaction accounts that meet consumer needs
- Increase access to safe and affordable credit
- Expand equitable access to savings and investments
- Improve the inclusivity of financial products and services provided or backed by the government
- Foster trust in the financial system by protecting consumers from illegal and predatory practices
The “expand equitable access to savings and investments” area of focus leaned heavily on the Treasury working to implement and increase take-up of retirement saving initiatives in the SECURE 2.0, such as the Saver’s Match and emergency savings programs.
The Treasury is committed to successfully implementing SECURE 2.0 provisions, and is working on multiple projects related to the law, including guidance on emergency savings and on student loan payment matching.
Saver’s Match
The Treasury is working to administer the new Saver’s Match, and released a notice requesting comments on certain aspects of the Saver’s Match.
The Saver’s Match program, which launches in 2027, allows low-income employees to receive a 50% federal matching contribution of up to $1,000, in addition to any employer match. In September, the Internal Revenue Service and the Treasury issued a notice requesting comments on Saver’s Match contributions, which will be paid by the Treasury under an upcoming provision in SECURE 2.0.
Saver’s Match contributions represent a new approach to promoting retirement savings aimed to improve the long-term financial security for millions of low- to moderate-income Americans. By making annual contributions of up to $2,000 to a 401(k) plan or an Individual Retirement Account (IRA), an employee can receive as much as an annual $1,000 Saver’s Match contribution from the Treasury.
The Treasury is tasked with promoting the Saver’s Match to increase public awareness of the matching contribution in different languages, and providing a report to Congress summarizing the anticipated promotional efforts.
Auto-enrollment
“Many states have taken steps to create auto-enrollment IRA programs,” reads the report. “In most of these states, workers are opted-into a state IRA program that facilitates automated payroll deductions if their employer does not have a retirement program.”
State retirement programs may increase the number of employers who choose to make retirement plans available to their workers and may increase the number of workers who choose to participate in employer-sponsored programs, according to the report. “States without IRA programs should consider establishing retirement savings programs for workers without access to employer-sponsored retirement benefits,” according to the report.
Emergency savings
Employers should evaluate their benefits to identify opportunities to improve their employees’ ability to “build emergency and retirement savings,” recommends the report. “This includes evaluating retirement plans to identify whether they can design vesting and employer contribution policies to be more inclusive.”
Related: New SECURE 2.0 regulations now in effect in 2024: Is your 401(k) in compliance?
“Employers should also facilitate access to emergency savings accounts that can help employees build financial resilience and protect future retirement income,” reads the report. SECURE 2.0 allows employers to automatically enroll workers in sidecar emergency savings accounts linked to their 401(k)s known as pension-linked emergency savings accounts (PLESAs) and expands workers’ ability to make limited penalty-free withdrawals for emergency expenses. “Employers should also consider other ways to support employees’ needs for emergency savings, such as explicitly authorizing the limited penalty-free distributions for emergency personal or family expenses,” provided for in SECURE 2.0, according to the report.