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Graff Still Bullish on SECURE 2.0 Prospects


With speculation running rampant on whether Congress will approve the SECURE Act 2.0 in the remaining days of the 117th Congress, we sat down with American Retirement Association CEO Brian Graff to get his take on what he sees happening, and what advisors and plan sponsors should be considering. 

Between three bills[i] currently under consideration, there are some overlapping provisions, some that are similar but take different approaches, and some that are included in only one of the bills. House and Senate members and staff have been working over the last few months to have a final bill ready for approval before the end of the year so that it can be attached to must-pass legislation.  

With that as a backdrop, the following is a synopsis of our conversation with the ARA’s Graff.   

Will it be enacted? The question that all retirement industry stakeholders and observers want to know—will the SECURE Act 2.0 be approved by Congress and signed by President Biden in the remaining days of the 117th Congress? Are you willing to assign a probability? And if for some reason a final bill is not enacted, do you think it stands a chance in the 118th Congress?

I would be pretty disappointed at this point if it doesn’t get done. I wouldn’t say it's 100% because it's Washington, DC and nothing’s 100%, but I think we’re in as good a position as anything to get it done as part of the Lame Duck session just because it's so bipartisan. So much work has already been done on the legislation—fortunately, they have been working on it since August. And since it is bipartisan and is done for the most part, it’s really in a great position to get attached to something that has to pass.

Graff indicated that he believes there’s a greater than 90% chance that the legislation is enacted, adding that it’s likely to be passed right before Christmas. The ARA CEO further explained that he believes it’s not an issue of substance as to whether the bill gets sidetracked, but more of a question of whether there is going to be a “legislative vehicle” or not. “You never know what the mood's going to be at the time; right now, they seem to be playing relatively well in the sandbox together, but that can change rapidly,” he emphasized.  

Opportunities and Concerns  

The ARA has just shared some research that highlights the impact of two key provisions: the expanded and enhanced Saver’s Match, and the Starter 401(k).

Saver’s Match: The former could impact more than 100 million savers according to the research. However, considering how expensive this provision is—at least in the way that Congress accounts for such things—does it retain high levels of bipartisan support, as it has traditionally? 

I think probably among the more conservative Republicans, there's some concern, but you know, it did pass unanimously out of the Senate Finance Committee, which does include some conservative Republicans, which is pretty amazing. But I do think, in the end, it’s a bipartisan package and I can't imagine that it happens without the Saver’s match being part of it.  

Graff further explained that converting the Saver’s credit into a matching contribution is really a fundamental change and a top priority of Sen. Ben Cardin (D-MD), who is a senior member of the Finance Committee, and that he can’t see this happening without one of his top priorities.  

Starter 401(k): The ARA was a big proponent of the Starter 401(k) bill and corresponding provision in the Senate’s EARN Act. The research says it could expand coverage to some 19 million workers—what do advisors need to know about this provision and how to best position it so that employers take advantage?

We’re feeling very bullish about this; I think both sides recognize it's a good idea and the revenue costs came in fairly reasonable, and so, I'm very confident that it will be in the final package.

I think particularly for advisors who are in states that are requiring employers to have a plan, it's definitely something they want to look at; do they want to have an offering for those companies that need to have a plan. The Starter K is an easy and effective solution for those small employers—no testing required and wrapping it up into a MEP or a PEP would seem to make a lot of sense.

Paper statement: We know that one provision the ARA is opposed to concerns the requirement that DC plans provide a paper benefit statement at least once annually unless the participant opts-out of the paper requirement. Do you have any predictions on what might happen in the final bill?

Is it going to kill the bill? No. But there are ways we could compromise, and I'm worried that we'll end up with a result that isn’t as good as it could be. So, I’ll say that I continue to have concerns about this.

Long-term, part-time workers: There has been some concern about the timing of the implementation of some provisions—notably the acceleration of eligibility from three years to two for long-term, part-time workers. What’s your sense of the likelihood of passage of this provision—and, if passed, timing?

I’m less concerned about this provision; the biggest concern was the effective date, and the expectation is that it's going to be pushed back a year, so it won’t be effective until 2024.

Roth catch-up contributions: There has been some concern among advisors regarding the shift to Roth for catch-up contributions, though one version provides an exception for workers making less than $100k. Is this likely to pass, and if so—is it just one of those “pay fors” that we have to live with?

Like the effective date for the long-term, part-time workers, Graff noted that he believes it will be pushed back.

I would say the same thing for Roth catch-up contributions. I think, similarly, the expectation is now that we're at the end of the year when this could get passed, the second to last week of the year, the likelihood is that this will necessitate them having to make that effective in 2024 as well.

As to the “pay for” aspect, Graff noted that this bill doesn’t happen without it since it pays for a good portion of the bill. He added, however, that it might include a provision like the Senate bill that exempts lower-income people from the requirement.

Key differences: We know there are some key differences between the three main bills. Are there any that you would like to see worked out one way or the other? 

There's an important difference in the startup credits. The House bill provides for a 100% credit and the Senate bill is only 75%. Obviously, we would prefer the 100% and we are pushing that.

New provisions: Are there any provisions and/or changes that were left out of the three bills that you believe should be acted on by Congress?

While acknowledging that the EARN Act includes a credit for small employers that adopt an automatic portability arrangement, Graff noted that the reach of the provision is fairly minor.

I think one of the areas, particularly, that didn't get addressed enough was in the area of leakage. The data show that leakage is primarily people switching jobs and either cashing out or having plan loans that essentially become distributions and don’t get paid back. And I think there's going to be interest in trying to do more to reduce leakage in future legislation.

Action steps: Finally, assuming a final bill is enacted, what action steps should advisors and plan sponsors be taking in the short term?

If not now, fairly soon after this legislation happens, you need to start thinking about how this is going to impact your clients. In the case of a plan sponsor, there are definitely some things that need to be thought about—like whether to offer matching contributions on student loans and how to deal with part-time workers. In terms of plan design issues, you should be thinking about how to communicate the Roth changes to employees. There's going to be a ton of implementation issues that both advisors and plan sponsors will have to deal with.

ARA’s GAC: Can you talk a little bit about how the Government Affairs Committee and ARA staff have worked together to help shape this (and other legislation)?  

The Legislative Affairs Committee, which is sort of a joint committee of all the different organizations, has been working for years on many of the provisions that will likely end up being in the final legislation. And really, it's a grassroots process where we are talking to our members across the country, getting their ideas on how to improve the system, and getting their ideas on some of the issues that are problems with the system.

I think family attribution is sort of my favorite example of a grassroots proposal that came out of our Government Affairs Committee. And you know, it really was our members saying: this is a provision in the law; it makes no sense anymore. What are we doing? And it's led to what would be likely its repeal.

Washington Update

Interested in learning more? Hear directly from Brian Graff, as well as the ARA’s Chief Government Affairs Officer Will Hansen, on the latest activity with respect to the SECURE 2.0 legislative process. Graff and Hansen in a Dec. 2 NAPA Washington Update will highlight the provisions most likely to be included in legislation, provisions that might be tweaked, and provisions that might be left for down the road for a future Congress. 


[i] The legislation—nicknamed SECURE 2.0, as it builds on the foundation laid by the SECURE Act passed in late 2019—is currently (and informally) comprised of three bills: