Compliance October 26, 2022

ERIC Calls for SECURE 2.0 To Pass This Year

In addition to voicing its support, ERIC also offered recommendations and criticism on various provisions in the legislation.

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The ERISA Industry Committee released a letter addressed to Congress that detailed its recommendations and views regarding a package of retirement reform bills dubbed “SECURE 2.0.” The In the letter, ERIC said it hopes to see a retirement reform bill passed by the end of the year.

SECURE 2.0 refers to one bill passed by the House, called the Securing a Strong Retirement Act, and two Senate bills that have passed their respective committees, but have not yet received a full vote. The Senate bills are called the Enhancing American Retirement Now Act (EARN), and the Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act (RISE and SHINE). The three bills aim to increase American’s access to retirement plans in a variety of ways.

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The original SECURE Act was the Setting Every Community Up for Retirement Enhancement Act of 2019.

The latest legislation aims to improve Americans’ ability to save for retirement. For example, provisions in the EARN and SSRA bills are intended to make it easier for workers with student loan debt to repay it and save for retirement. The bills would enable workers to have pay deducted to repay their loans and have their employer match that amount as a retirement plan contribution. ERIC supports this proposal and hopes to see a version of it in the final bill.

Another common obstacle to saving is the concern of needing money for an emergency, and not having it available to them quickly since it is in a retirement plan and subject to a tax penalty for early withdrawal. The EARN and RISE and SHINE bills have early withdrawal provisions that make it easier to withdraw money from a plan in certain situations. ERIC likewise supports this proposal.

The ERIC letter also supported simplifying fee disclosure and summary plan statements, and tax incentives for plan participation. It also supported a provision only found in the EARN bill, which would allow overfunded pensions to use the extra money on health and life insurance benefits for plan participants until 2032. The current expiration on that provision was set for 2025 by prior legislation.

All three bills permit well-funded plans to forego recoupment of overpayments if the overpayment was the fault of the retiree. ERIC hopes to see this provision in the final legislation.

One proposal absent from all three bills that ERIC suggested was for Congress to create a plan “lost and found.” Some employers have large and complicated retirement plans and sometimes struggle to find missing participants. It recommends that Congress require creation of a database of retirement accounts so that workers and retirees can track down past employers and access their retirement funds.

The letter also expressed disapproval for SSRA section 314 “which takes a step away from electronic delivery of plan disclosures.” Section 314 of SSRA requires participants occasionally receive certain information by paper documents.

Congressman Jim Himes, D-Connecticut, of the House Financial Services Committee, told a conference hosted by the Investment Adviser Association that he expects SECURE 2.0 to pass during this Congress, most likely during the “lame duck” period between November and January.

The full letter is available here.

Data and Research October 26, 2022

Anxiety Among Public Sector Workers Is Growing

New research from MissionSquare Research Institute examines how the current economic conditions have impacted public service employees and how employers can help.

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New research from MissionSquare Research Institute looks into the role that employer-sponsored retirement benefits, retirement readiness, worsening economic conditions and other factors are playing in reducing workers’ anxiety by helping them achieve financial security.

According to the report, “Inflation, Market Volatility, and Retirement: How Employer Benefits Can Help Public Sector Worker Anxiety Over Current Economy,” 84% of public service employees say they are anxious about the impact of economic conditions and market volatility on their personal financial security.

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Current economic conditions and market volatility prompted 81% of respondents to say that they feel worried about whether they will have enough money to live comfortably in retirement, while they will have enough money to last them throughout retirement, 70% said they were worried about having enough in emergency savings right now, while 72% said they worried about being able to retire on time

Nearly half of state and local public service workers are currently saving less than usual for retirement due to high inflation rates over the past year. Of that group, more than one-third said that housing costs (e.g., rent, mortgage payments,) have led to saving less than usual for their retirement, the report says. indicate that high inflation (48%) and rising housing costs (37%) are triggering lower retirement savings. 

While a large majority of all workers report reducing or not changing their savings rates, given housing expenses, non-white respondents were more than twice as likely as their white peers to report that more than usual for retirement due to current housing costs, the report adds.

For the majority of public sector workers, both employer retirement and non-retirement benefits (e.g., health insurance, other insurance benefits, PTO/leave, non-traditional benefits) and other factors make employees more inclined to stay in their job, the report says. Among public employees, 42% believe their employers retirement benefits are better than those offered in the private sector, 11% believe they are worse, and 35% believe they are about the same.

According to the report, the top three actions employers could take to bolster retirement readiness include providing higher wages/salary (86%), better retirement benefits like employer matches (54%) and better healthcare benefits in retirement (48%).

These findings are based upon a national survey of 1,003 state and local government workers conducted by Greenwald Research on behalf of MissionSquare Research Institute in September. The survey polled respondents about financial and retirement security amid current economic conditions.

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