A bipartisan effort to boost retirement security has resulted in the introduction of a massive legislative package in the House of Representatives, though the bill’s passage isn’t expected in the 2020 congressional calendar’s waning days.
The Securing a Strong Retirement Act of 2020 would require, among dozens of provisions, 401(k), 403(b) and SIMPLE plans to automatically enroll participants upon becoming eligible while giving employees the opportunity to opt out, raise the age at which individuals are required to begin withdrawing a percentage of their tax-deferred retirement plan to 75 from 72, allow 403(b) plans to participate in multiple employer plans and invest in collective investment trusts, and create a national online database of lost retirement accounts in order to reduce the number of missing participants.
The Securing a Strong Retirement Act, which includes provisions featured in previously introduced bills, was introduced Monday by Ways and Means Committee Chairman Richard Neal, D-Mass., and Kevin Brady, R-Texas, the committee’s ranking member.
In announcing the bill, Mr. Neal said in a statement that the COVID-19 pandemic has exacerbated the nation’s existing retirement crisis, further compromising Americans’ long-term financial security.
The bill builds on “the landmark provisions in the SECURE Act and enable more workers to begin saving earlier — and saving more — for their futures,” Mr. Neal said. “This bill will help Americans approach old age with the confidence and dignity they deserve after decades of hard work and sacrifice.”
With bipartisan support, Congress passed the Setting Every Community Up for Retirement Enhance Act, known as the SECURE Act, in December. That bill, which made it easier for smaller employers to join open multiple-employer plans, eased non-discrimination rules for frozen defined benefit plans and added a safe harbor for selecting lifetime income providers in defined contribution plans, was the first meaningful piece of retirement legislation passed since 2006.
“Ensuring Americans have the resources they need for a prosperous retirement is a bipartisan priority — and I’m glad that Chairman Neal and I were able to come together again to build on our work from the SECURE Act,” Mr. Brady said in a statement. “Our legislation will make it easier for folks to save, protect Americans’ retirement accounts, and give workers more peace of mind as they plan for the future.”
The bill would also make changes to qualifying longevity annuity contracts, or QLACs, by removing the 25% cap — currently retirement savers can spend up to 25% of their account on a QLAC — and raising the limit to $200,000 from $135,000.
Melissa Kahn, managing director of retirement policy for State Street Global Advisors’ defined contribution team, welcomed the bill’s introduction Monday and said its QLAC provision would likely entice more employers to offer the product, which she described as “cost effective to hedge against longevity risk.”
The bill’s auto enrollment provision, which initially enrolls participants at a floor of 3% and is then increased by 1% each year until it reaches 10%, “will mean far greater retirement savings in my view, which would powerfully address the adequacy challenge in the country,” said Kent Mason, a partner with law firm Davis & Harman.
With an election Nov. 3 and few legislative days remaining on the congressional calendar, it’s unlikely the bill is signed into law this Congress, though not impossible, Ms. Kahn said.
Wayne Chopus, president and CEO of the Insured Retirement Institute, said in a statement that while “the legislative calendar is limited for the remainder of the year, plenty of time still exists for Congress to act on this important proposal and deliver significant benefits to workers and retirees.”
Ms. Kahn said the pandemic and subsequent stimulus bills likely delayed the Securing a Strong Retirement Act’s introduction this year, but lawmakers wanted to get it out this Congress to at least get feedback from various stakeholders.
Mr. Mason added: “This is not a 2020 issue, but it’s a great signal for bipartisanship for 2021.”