There is much to like about pending legislation to bolster the prospect of a secure retirement for millions of Americans. Referred to as the SECURE Act, the measure aims to make it easier for small employers to join multiple-employer plans, ease non-discrimination rules for frozen defined benefit plans and add a safe harbor for selecting lifetime income providers in defined contribution plans.
The Setting Every Community Up for Retirement Enhancement Act of 2019 also would encourage employees to increase their retirement savings annually through automatic increases in contributions to defined contribution plans and requires employers to provide estimates of how much retirement income an employee's account would provide if it were invested in an annuity.
Such provisions would help more full-time employees along the path to building adequate retirement savings. But the SECURE Act also takes steps to help more part-time employees gain access to saving in their employer's 401(k) plan, a July 8 story by Margarida Correia explained.
Under the legislation, plan sponsors will have to open their plans to employees who work at least 500 hours a year for three consecutive years. Currently, they must provide plan access to employees who work at least 1,000 hours a year, or about 19 hours a week.
Under the current 1,000-hour requirement, many part-time workers are unable to qualify for their company's 401(k) plan even if they've consistently worked there for years.
The good news is that the measure does not require sponsors to make employer contributions to the 401(k) accounts of part-time employees working 500 to 1,000 hours. It also will not require sponsors to include the part-timers in their non-discrimination testing. Those features helped relieve plan sponsor concerns, industry experts said.
Understandably, plan sponsors are not fans of new government mandates. But their industry representatives say they can live with the proposed access adjustments for part-time workers.
That sounds like a win for both sides.
With the measure now pending in the Senate, after easily passing the House in June, senators must not let this bill languish.