Posted on March 29, 2019

Bipartisan Effort to Expand Access to Workplace Retirement Plans, Lifetime Income Options

WASHINGTON, D.C. – With 10,000 Americans retiring daily and a large worker population lacking access to employer-provided retirement plans, a bipartisan group of legislators in the House of Representatives today introduced a robust retirement security measure.

The new bill was negotiated among House Ways and Means Committee Democrats and Republicans. Committee Chairman Richard Neal (D-MA), Ranking Member Kevin Brady (R-TX), Rep. Ron Kind (D-WI) and Rep. Mike Kelly (R-PA) led efforts to produce the Setting Every Community Up For Retirement Enhancement Act of 2019 or “SECURE Act.”  

The new legislation includes the core provisions of H.R. 1007, the Retirement Enhancement and Savings Act (RESA) of 2019, which IRI has long-supported plus additional provisions from previously introduced measures. The Ways and Means Committee is expected to vote on the new measure next week.

In January, Chairman Neal, a long-time champion of retirement security, placed this issue among his top four legislative priorities for the year. The committee held a hearing in early February about retirement issues where several policy proposals contained in the new bill were discussed.

“It’s quite clear to me that Chairman Neal says what he means,“ said Wayne Chopus, president and CEO of the Insured Retirement Institute (IRI), a leading proponent of retirement security legislation. “Three months ago, Chairman Neal put retirement security on his priority list and since then, we’ve had a hearing, negotiations, a new bill and a scheduled vote to advance it to the House floor. This is major progress.”

The SECURE Act contains several common-sense measures to help Americans by expanding opportunities to save for retirement; increasing access to lifetime income products; helping savers make more-informed decisions about their finances for retirement and enhancing features of workplace retirement plans.

The SECURE Act will include provisions to remove restrictions on an employer’s ability to band together in a Multiple Employer Plan (open MEPs). Allowing small businesses to band together to achieve economies of scale and to delegate to a professional plan fiduciary responsibility for sponsoring the plan would facilitate more employers offering a retirement plan to workers.

To help workers ensure that they do not outlive retirement savings, the SECURE Act would expand access to lifetime income products provided by insurers. The bill would remove a barrier which discourages employers from offering these products in their retirement plan menus by allowing employers if the products to be included have been certified as meeting certain existing regulatory requirements enforced by state insurance regulators, such as capital and reserving standards.

A related technical change to the tax code will ensure the portability of lifetime income products. Current law jeopardizes the guarantees associated with those investments if their employer changes recordkeepers. The SECURE Act will permit plan participants to preserve their lifetime income investments and avoid surrender charges and fees.

Another provision will help savers make more-informed decisions regarding their finances by providing lifetime monthly income estimates on benefit statements. IRI research found that more than 90 percent of workers want retirement income estimates and would find them helpful. More than 75 percent of workers said they would increase their savings level after seeing these estimates.

The SECURE Act also will increase opportunities for workers to save by enhancing automatic enrollment and escalation features. Studies have shown that automatic enrollment is extremely successful in getting more people to save for retirement with participation rates at least 10 percentage points higher in plans with automatic enrollment. By removing the auto enrollment safe harbor cap and increasing the cap for automatic escalation of employee deferrals of employee pay, the SECURE Act will expand opportunities for Americans to save more for their retirement.

Additional IRI-supported provisions added to the SECURE Act include measures to require employers to allow long-term, part-time workers to participate in their workplace 401k plan, and a measure which would increase the current required minimum distribution age limit from 70 ½ to 71 to help workers who face an increased risk of outliving retirement assets because of longer lifespans.

“We look forward to next week’s committee vote to advance this bill to the House floor,” Chopus said. “This is clearly is a major-step forward to address our looming retirement crisis.”

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Contact: Dan Zielinski