SECURE 2.0 gets blessing in the House

Lawmakers in Washington recently cleared a major obstacle to passing retirement security legislation, but plenty of work remains before the finish line — sending a bill to President Joe Biden's desk — is reached.

The House on March 29 overwhelmingly passed the bipartisan Securing a Strong Retirement Act of 2022, referred to as SECURE 2.0, in 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.

Attention now turns to the Senate, where lawmakers are expected to craft and markup a SECURE 2.0 package of their own that then will have to be reconciled with the House bill. The House-passed package includes a slew of provisions aimed at getting people to save more for retirement, including requiring 401(k) and 403(b) plans to automatically enroll participants upon becoming eligible; allowing 403(b) plans to participate in multiple employer plans; creating a national online lost and found database for Americans' retirement plans; and making changes to qualified longevity annuity contracts, or QLACs, by removing the 25% cap — currently retirement savers can spend up to 25% of their account on a QLAC.

The bill's auto-enrollment provision initially enrolls participants at a floor of 3% of pay, and that contribution is then increased — unless the participant opts out — by 1 percentage point each year until it reaches 10%.

SECURE 2.0 would also raise the age at which individuals are required to begin withdrawing a percentage of their tax-deferred retirement plan to 75 from 72 over the next decade; permit an employer to make matching contributions to a 401(k) plan, 403(b) plan or SIMPLE IRA on qualified student loan payments; reduce the service requirement for part-time workers to participate in an employers' retirement plan to two years from three; and enhance the startup tax credit for small businesses launching a retirement plan.

"After a lifetime of hard work, no American should face financial uncertainty in their old age," Mr. Neal said in a statement following the House vote. "This bipartisan legislation will make it easier for workers to save and plan for their futures."

The bill has broad backing from the retirement community, including from Thasunda Brown Duckett, New York-based president and CEO of TIAA-CREF, who said in a statement that if enacted, the bill will "help more Americans attain a secure financial future and increase their confidence in achieving overall financial well-being."

The Senate is unlikely to simply take up the Securing a Strong Retirement Act of 2022, said Michael P. Kreps, Washington-based principal and co-chairman of the retirement services practice at Groom Law Group. Rather, he and others in the retirement industry expect the Senate to craft its own package in a process much like the House.

"The Senate rarely, if ever, just takes what the House gives them, and the Senate has its own priorities," Mr. Kreps said.

The two relevant Senate committees — the Finance and Health, Education, Labor, and Pensions committees — are expected to introduce and markup bills of their own in the coming months.

The Securing a Strong Retirement Act of 2022 is made up of two retirement security packages introduced last year — a bill with the same name introduced by Messrs. Neal and Brady that was approved out of the Ways and Means Committee via a voice vote in May, and the Retirement Improvement and Savings Enhancement Act, or RISE Act, which was passed out of the House Committee on Education and Labor via a voice vote in November. House Education and Labor Committee leaders — Chairman Robert C. "Bobby" Scott, D-Va.; ranking member Virginia Foxx, R-N.C.; Health, Employment, Labor and Pensions Subcommittee Chairman Mark DeSaulnier, D-Calif.; and subcommittee ranking member Rick W. Allen, R-Ga. — introduced the RISE Act in November.

"The legislative process is really working as intended. You have the relevant committees that are responsible for retirement policy that are all working on their individual pieces," said Lance Schoening, Des Moines, Iowa-based director of policy for Principal Financial Group.

Added Melissa Kahn, Washington-based managing director of retirement policy for State Street Global Advisors' defined contribution team: "It is amazing and heartening to see that there are issues where it really transcends partisanship."

Mr. Neal, a longtime proponent of retirement security legislation, has called on his Senate colleagues to make sure SECURE 2.0's momentum continues. "In advancing this measure, we build on the positive impact of the SECURE Act and continue expanding opportunities for Americans to plan for their golden years," he said in his statement. "I hope the Senate follows our lead and swiftly sends this widely supported measure to President Biden's desk."

On the same day as the House's SECURE 2.0 vote, the Senate HELP Committee held a hearing on retirement security during which Chairwoman Patty Murray, D-Wash., said she and Sen. Richard Burr, R-N.C., the committee's ranking member, were working on bipartisan retirement legislation that they are aiming to unveil this spring.

Sens. Rob Portman, R-Ohio, and Ben Cardin, D-Md., two Finance Committee members and retirement security leaders, in May reintroduced the Retirement Security and Savings Act, which features more than 50 provisions aimed at getting people to save more for retirement, many of which overlap with the House's SECURE 2.0 bill, though the Portman-Cardin bill notably does not have an auto-enrollment provision.

The two senators said March 29 in a joint statement that they're encouraged with the ongoing bipartisan and bicameral interest in retirement security. "We will continue to support solutions that help increase savings, expand access to retirement plans for working families and promote lifetime income solutions," the senators said. "This is an area of broad, bipartisan consensus. We look forward to working with Chairman (Ron) Wyden, (D-Ore.), Ranking Member (Mike) Crapo (R-Idaho) and our House colleagues to move this legislation through the Finance Committee as swiftly as possible so that it can get to the president's desk."

Some changes were made in the House-passed bill during the negotiation process that many stakeholders would like to see reversed in a Senate bill, including allowing 403(b) plans to invest in collective investment trusts.

The original bill that was advanced out of the Ways and Means Committee last year included a provision to amend existing securities laws to permit the use of CITs in 403(b) plans. However, the provision was largely removed before the House vote after an objection raised by House Financial Services Committee Chairwoman Maxine Waters, D-Calif., Groom Law Group's Mr. Kreps said.

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

A representative for Ms. Waters and the committee did not respond to requests for comment.

"We were disappointed that there were last-minute jurisdictional objections raised, so we are hoping that in the final bill those types of issues can be worked out because that is going to be enormous in the 403(b) space in terms of bringing costs down for plan sponsors and, of course, plan participants," Ms. Kahn of State Street Global Advisors said.

Sources expect the Senate committees to mark up their own retirement security bills in the spring or summer while House and Senate leadership coordinate on reconciling any differences between the two chambers' agreed upon packages. Then, perhaps after the midterm election in November, Congress can attach SECURE 2.0 to a piece of must-pass legislation, like a spending bill, and it can be signed into law, Ms. Kahn said.

But Mr. Kreps said it's still a long road ahead for SECURE 2.0's passage as Congress deals with higher-profile issues, like inflation, the pandemic, the war in Ukraine and other topics.

"It's a heavy lift to get something done this year, (but) it's not impossible," he said. "The nice part about retirement is that you can usually come together and find some sort of bipartisan compromise on this grab bag of small fixes. The challenging part is (SECURE 2.0) is a grab bag of small fixes so it's not something that drives politics and so it's never a massive priority; it gets done when it gets done."