Bipartisan Auto Reenroll Act of 2023 Introduced in Senate

Building off of the SECURE 2.0 Act of 2022, a new piece of bipartisan legislation introduced in the Senate aims to encourage more employees to enroll in a workplace 401(k) plan. 

The Auto Reenroll Act of 2023, introduced on Wednesday by Senators Tim Kaine, D-Virginia, and Bill Cassidy, R-Louisiana, would codify the ability of employers to adopt automatic re-enrollment plans, enabling them to, after three years, re-enroll workers who had previously opted out of contributing to retirement plans.  

This bill could prompt more employers to adopt auto re-enrollment policies in addition to their auto-enrollment efforts. As a result, more employees who at one time opted out of a 401(k) plan or have stopped contributing could be encouraged to start or resume saving. 

Specifically, the Auto Reenroll Act would amend safe harbors in the Employee Retirement Income Security Act and Internal Revenue Code to permit plan sponsors to re-enroll non-participants at least once every three years, unless the individual affirmatively opts out again.  

In addition, plans would be permitted to “sweep,” as a group, everyone who meets the requirements for re-enrollment, rather than implement the change on each employee’s enrollment date, and could target the sweep to those not participating in the plan at all, rather than to all employees, according to the Senate Health, Education, Labor, and Pensions Committee.  

Kaine and Representative Kathy Manning, D-North Carolina, had sponsored the Auto Reenroll Act of 2022 last year, but it would have mandated the re-enrollment feature, whereas this year’s bill takes a “softer approach,” according to Chris Spence, head of federal government relations at TIAA, which supports the bill.  

The Senate committee press release stated that some employees choose to not participate in their employer’s retirement plan or take advantage of the full employer match when starting out and making entry-level wages. When they move up the income ladder, many forget to join the plan or increase their contributions.  

In fact, only 75% of private sector workers who have access to employer-sponsored retirement plans participate, and one-third of employees are not taking advantage of their full employer matching contribution, according to the committee.  

“With over half of all Americans not on track for retirement and other safety nets like Social Security on track to go insolvent, we are in a retirement crisis,” Cassidy said in a press release. “Auto-reenrollment puts workers in the better position to prepare for retirement while staying in control of their financial decisions.”  

TIAA is urging Congress to pass the bill, arguing that policies such as auto-enrollment and auto-re-enrollment are “critical tools to improving American workers’ retirement outcomes.” 

“If automatic enrollment itself has increased participation in a retirement plan, logically, automatic re-enrollment is going to further increase participation,” Spence says.  

According to PLANSPONSOR’s 2023 Plan Benchmarking Report, which surveyed 2,562 plan sponsors from a broad variety of U.S. industries, there has yet to be much uptake of re-enrollment from plan sponsors. The data reveals that 47.1% of plan sponsors offer automatic enrollment, but only 7.6% of plan sponsors said they re-enroll employees not participating in the plan on an annual basis, and 7.2% reported doing so one time. 

In addition, 6.6% said they re-enrolled participants saving below the plan’s default deferral rate annually, and just 3.8% said they re-enrolled uninvested participants in the default investment annually 

Spence says it is possible that not many plan sponsors are adopting this feature because it is still relatively new in the industry.  

The legislation also has support from the American Benefits Council, Nationwide Retirement Solutions and Fidelity Investments.