Lawmakers work behind scenes to get SECURE 2.0 passed this year

There are only a few months left in the congressional session, and with myriad pressing issues and midterm elections in November, time is tight to pass another retirement security package. But Washington lawmakers and their staffs are working on a final bipartisan bill that stakeholders are cautiously optimistic will reach President Joe Biden's desk this year.

There are three bipartisan bills that House and Senate members are discussing behind the scenes, attempting to reconcile any differences between the bills and put forth a package aimed at bolstering Americans' retirement security.

The House in March overwhelmingly passed the bipartisan Securing a Strong Retirement Act of 2022 on a 414-5 vote. The bill, introduced by Ways and Means Committee Chairman Richard Neal, D-Mass., and ranking member Kevin Brady, R-Texas, builds on the Setting Every Community Up for Retirement Enhancement Act, known as the SECURE Act, which was signed into law in late 2019.

In the Senate, the Health, Education, Labor and Pensions Committee on June 14 advanced its own retirement security bill — the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act, or RISE & SHINE Act — out of committee, and the Finance Committee did the same on June 22 with its Enhancing American Retirement Now Act, or EARN Act.

Those three bills include similar provisions to permit an employer to make matching contributions to a 401(k) plan, 403(b) plan or SIMPLE IRA based on qualified student loan payments; reduce the service requirement for part-time workers to participate in an employer's retirement plan to two years from three; and enhance the startup tax credit for small businesses launching a retirement plan, among others, and will form the basis of a SECURE 2.0 package.

Sen. Rob Portman, R-Ohio, a Finance Committee member and longtime retirement security proponent, reintroduced a bill in 2021 with Sen. Ben Cardin, D-Md., that features many of the same provisions in the House-passed bill and Senate companion versions.

Mollie Timmons, Mr. Portman's press secretary in Washington, said in an email that Mr. Portman is confident the retirement security legislation will get "over the finish line before the end of this Congress. It is a top priority of his as we enter into these last few months of session."

Ms. Timmons added, "Senator Portman knows that both chambers can work together to finalize a product that will be beneficial for all Americans."

One of the lawmakers at the center of discussions is Sen. Patty Murray, D-Wash., chairwoman of the HELP Committee who introduced the RISE & SHINE Act along with Sen. Richard Burr-R-N.C., the committee's ranking member.

"Congress needs to continue taking every step we can to strengthen families' finances — especially when it comes to ensuring retirement security and helping people save for a rainy day," Ms. Murray said in a statement to Pensions & Investments. "I'm working hard with my colleagues on the HELP and Finance committees and in the House to finalize a comprehensive retirement package that will bolster emergency savings and retirement security for families in Washington state and all across our country."

Lance Schoening, Des Moines, Iowa-based director of policy for Principal Financial Group, estimates that a final SECURE 2.0 package will be ready sometime in the early fall. "Staff on both side of the Capitol are in the committees on this legislation … to come up with a negotiated, unified product for both chambers," Mr. Schoening said.

While each of the three bills are vastly similar, there are differences that need to be worked out, sources noted.

Arguably the most consequential difference involves automatic enrollment and automatic escalation. The House-passed bill features a provision to require new 401(k) and 403(b) plans to automatically enroll participants upon becoming eligible. Initially, participants would be enrolled at a floor of 3% of pay, and that contribution would then be increased — unless the participant opts out — by 1 percentage point each year until it reaches 10%.

Neither bill advanced out of committees in the Senate includes such a provision, but Diana McDonald, senior policy adviser at Groom Law Group in Washington, expects auto enrollment and auto escalation to make it into a final version. "That's how you increase Americans' retirement security," Ms. McDonald said.

Another major difference among the bills centers on expanding the saver's credit, which allows low- and middle-income Americans contributing to workplace retirement plans or individual retirement accounts to claim a credit against the taxes they owe. The amount of the credit depends on their income, tax filing status and how much they set aside for their retirement.

The House-passed bill would establish a 50% credit for all workers below a certain threshold based on the filers' adjusted gross income. Those above the threshold will get a slightly reduced credit that is gradually phased out.

The Senate Finance Committee's EARN Act would create a single 50% credit as well, but also make the credit refundable and turn it into a direct government matching contribution to the taxpayer's IRA or retirement plan, noted a post from Groom Law to which Ms. McDonald contributed.

With respect to 403(b) plans, the original bill advanced out of the Ways and Means Committee in 2021 included a provision to amend existing securities laws to permit the use of collective investment trusts in 403(b) plans. However, the provision was largely removed before the House passed the bill after an objection was raised by House Financial Services Committee Chairwoman Maxine Waters, D-Calif., sources said.

The Financial Services Committee had jurisdiction over the provision because it involved securities law, which led to Ms. Waters' objection, sources said. House leaders removed the provision instead of referring the bill to the Financial Services Committee for markup, sources said.

A representative for Ms. Waters did not respond to requests for comment, but retirement industry sources are confident the provision will make it into a final package, though it is not in either Senate version.

When the SECURE Act was signed into law in late 2019, it was the first retirement security bill Congress had passed since 2006. Retirement stakeholders are hoping they won't have to wait nearly as long for the next such bill.

Melissa Kahn, Washington-based managing director of retirement policy for State Street Global Advisors' defined contribution team, said there's plenty of bipartisan support to pass a SECURE 2.0 package this congressional session, despite the time crunch.

"I think we're in as good a place as we can be given the legislative calendar," Ms. Kahn said.

Once a final SECURE 2.0 package is finished, industry sources expect lawmakers to attach it to a piece of must-pass legislation, such as a spending bill.

"There's not this idea of pent-up demand like there was for SECURE 1.0, but there's no big objections to it and everybody likes to say, 'Hey, look we did a thing,' even if there aren't folks wildly screaming about it from the sidelines in support of it," Groom Law's Ms. McDonald said. "It's a good, solid bill that there's not going to be a problem with it hitching a ride" on a piece of must-pass legislation.

With the November elections approaching, Principal's Mr. Schoening is hopeful "that the spirit of bipartisanship will carry through and we get the package included" in a larger bill that moves through Congress after the election in the lame-duck period.

Added SSGA's Ms. Kahn, "There's no silver bullets in any of these bills, but they're incrementally making the system so much better."