Can “SECURE 2.0” Help Solve America’s Looming Retirement Crisis?
The numbers behind America’s looming retirement crisis are stark. Nearly seven in 10 people ages 55 to 64 have retirement savings less than their annual income, and the middle 40 percent of workers in that age group have a median retirement savings of only $60,000, according to the Economic Policy Institute’s Retirement Equity Lab. Meanwhile, according to Pew, about four in 10 private-sector workers do not have access to a workplace retirement savings program.
With this in mind, it’s heartening that Congress has taken proactive steps in recent years to make it easier for Americans to save for retirement.
Building On Earlier Legislative Success
The SECURE Act, passed in 2019, was the most significant retirement security legislation to take effect in at least a decade. Among other provisions, it enabled unrelated businesses to join together to form multi-employer retirement plans; offered tax credits for employers who establish retirement plans with auto-enrollment and raised the age at which retirement plan beneficiaries must take required minimum distributions (RMDs) to 72 from 70½.
Now Congress is making further progress with the Securing a Strong Retirement Act of 2021, which observers have nicknamed “SECURE 2.0.” The proposed bill, which was recently passed out of the House Ways & Means Committee by a unanimous vote, would make additional modifications to retirement rules and guidelines that would further strengthen Americans’ access to retirement savings vehicles and planning services.
Just as we did with the SECURE Act, FSI strongly supports SECURE 2.0, and we are encouraged that members of Congress have taken a bipartisan approach to moving this crucial legislation forward. If passed into law, SECURE 2.0 would join its predecessor in enacting fundamental changes that stakeholders across the political spectrum can agree are sorely needed.
What is SECURE 2.0?
Key provisions of SECURE 2.0 include:
- Expanding automatic retirement plan enrollment to newly-created 401(k) plans;
- Higher catch-up limits for retirement accounts;
- Clarifying that 403(b) plans may be established and maintained as multi-employer plans;
- Allowing companies to provide retirement match contributions for student loan payments made by employees;
- Increasing the RMD threshold age from 72 to 75 over a period of years, giving workers more time to save for retirement;
- Reducing the excise tax on certain accumulations in qualified retirement plans; and
- Establishing a new retirement savings lost and found system.
House Ways and Means Chairman Richard Neal (D-MA) and Ranking Republican Kevin Brady (R-TX) introduced an earlier version of SECURE 2.0 in October 2020. The current version includes additional provisions, including new mechanisms for paying for the bill through new revenues.
What’s Next – And How the Wealth Management Industry Can Help
We steadfastly support measures that would bolster Americans’ retirement security. In a real sense, the changes contained in SECURE 2.0 would not only make retirement saving more streamlined and accessible for investors, but would also increase the flexibility that advisors have to help clients reach their financial and life goals.
Chairman Neal is encouraging the Biden Administration to include SECURE 2.0 as part of its American Families Plan, as bipartisan support for SECURE 2.0 may make it an attractive addition to the package. The other option is to bring the bill to a vote on its own, first before the entire House and then before the Senate, prior to reaching President Biden’s desk.
Whatever form it takes, we plan to rally our membership as the bill nears key votes, encouraging them to reach out to their congressional representatives and advocate for its passage. Our advocacy team will also be contacting members of Congress to educate them on the bill’s importance for our membership and their clients.
Looking ahead, we are also focused on advancing other measures to increase access to retirement services. As one key example, we have continually advocated for the restoration of the pre-2017 tax deduction for investment advisory fees, a move that would encourage investors to seek professional financial guidance.
We are very pleased to see substantive progress being made on a crucial problem confronting American workers. We will continue to lend our strong support to SECURE 2.0 and other positive changes that will support the financial journeys of Main Street American investors, help them save more for retirement and lead more comfortable, dignified lives in their later years.
Dale E. Brown is President and CEO of the Financial Services Institute, the leading advocacy group and industry association for independent financial services firms