Under the new program, however, workers will still receive the match even if they have no tax liability, as the money will be deposited directly into their retirement accounts. This helps level the playing field, Iwry said, though the improvements won’t take effect until more than 25 years after he first proposed the idea.
In 2006, Iwry co-authored a proposal for the automatic IRA in collaboration with a senior fellow at The Heritage Foundation to develop a “bipartisan, non-ideological approach” to expanding retirement coverage, he said. While the proposal never took off on a federal level, Iwry’s work eventually led several states to enact their own auto-IRA programs, he said.
He had hoped for the state programs to serve as “a kind of pilot project,” he said, providing proof of concept that a nationwide federal auto-IRA initiative would work well.
While Iwry never thought of state-by-state initiatives as preferable to a nationwide program, he said he’s encouraged by the increasing expansion of auto-IRA programs.
There are currently 15 states that have enacted auto-IRA programs, according to the Georgetown Center for Retirement Initiatives.
In his view, Congress should take action to help remaining states enact similar programs, while bolstering existing programs and promoting uniformity among them.
“Federal legislation could do a lot to accelerate and universalize (this) movement” by extending it nationwide, he said.
Iwry described the auto IRA as “an inherently bipartisan idea,” noting that both former Sen. John McCain and former President Barack Obama supported the idea in their 2008 presidential campaigns.
The state programs have also led to the creation of more 401(k) plans by small employers, which he said was always a key part of the proposal’s goal.
Ultimately, federal legislation on the auto IRA is the “single biggest missing piece to support and augment the state movement to expand coverage,” he said.
When asked about the possibility of a SECURE 3.0, Iwry said, “We don’t have SECURE 3.0 in the works.”
It’s unlikely that there will be another large package of retirement legislation in the near term, he added, but there doesn’t need to be 90 or 100 legislative provisions enacted in order to make important improvements to the system, he said.
Future legislative priorities should include federal legislation on the auto IRA, increased support for the saver’s match, and further improving access to workplace retirement plans for part-time workers, he said.
Under SECURE 2.0, part-time workers that work at least 500 hours a year for two consecutive years become eligible for their employer’s retirement plan, whereas Iwry suggests further lowering that standard to just a 500-hour requirement without any time element involved.
Prior to the approval of automatic enrollment, 401(k) plans put a host of decision-making on individuals — which Iwry said is the biggest shift he’s seen in the retirement industry. Unlike defined contribution plans such as profit sharing or money purchase pension plans, early 401(k) plans primarily relied on individuals to sign up for the plan, decide how much to save and decide how to invest, which often resulted in stalled participation, he said.
Now, Iwry and others have been striving to “nudge the system back” to one with less decision-making through things like automatic enrollment and contribution increases.
Ultimately, employee benefits should not be something people are “left to their own devices to handle,” he said, but rather a set of plans and programs that help people while still allowing them to exercise some individual choice.