Last week the “dynamic” congressional duo of House Ways & Means Chairman Richie Neal (D-MA) and Ranking Member Kevin Brady (R-TX) unveiled legislation dubbed “SECURE 2.0.” While it’s early yet—and this Congress nearly over—we asked readers how they viewed the key provisions.
We’re talking about the “Securing a Strong Retirement Act of 2020”—a 132-page bill including some 36 provisions addressing everything from expanding coverage and increasing retirement savings, to preservation of income, simplification and clarification of retirement plan rules, to technical and administrative provisions.
Here’s what NAPA-Net readers thought—key retirement provision by provision, with a sampling of reader comments per provision:
1. EXPAND AUTOMATIC ENROLLMENT IN RETIREMENT PLANS BY ENROLLING EMPLOYEES AUTOMATICALLY IN THEIR COMPANY’S 401(K) PLAN WHEN A NEW PLAN IS CREATED
45% - I Like it.
37% - I REALLY like it.
11% - I could take it or leave it.
4% - I don’t like it.
3% - I REALLY don’t like it.
Comments on this particular provision were… varied. Here’s a sampling:
This could cause employer contributions to be lower.
I still think the plan sponsor should have the option of whether auto-enroll is implemented or not. There can be logistical and P.R. issues involved so I don’t think this is a one size fits all.
This is what I already try to do with every start up.
Everyone needs to save for retirement. Most individuals are inert; they make no choice. Auto Enrolling helps them save for retirement, gives them the opportunity to opt out, and is easier to administer from a compliance perspective.
Some companies may not have the infrastructure to handle auto enroll.
Most employees of companies with retirement plans have little to no experience when it comes to investments. Holding enrollment meetings help with education which typically increases participation.
This has the potential to be a nightmare administratively. For many plans this could work, but certainly not for all!
We need to be reasonable about driving up cost here and give folks the option rather than a mandate.
I like it but business owners might not.
Some clients don’t want the feature period...
Not all clients want auto-enroll.
Obviously only if the nondiscrimination testing could be passed.
As long as it’s not a mandate, I am happy with it.
Everyone hates mandates, but frankly, something like Cal Savers or Oregon Saves is the only way to move the needle. We MUST get young people to start deferring and keep it up in their early working years.
Still need to give smaller business owners the option as it is a major budget item.
The main problem is whether there is a 360-degree integration between the recordkeeper and the payroll company. Without that integration, there will be missed contributions and penalties. I do not like the idea of setting up a plan to fail right out of the gate.
I like it, I think it’s unlikely to go through.
While I like this in general, I can make several cases whereby auto enroll may not be the best fit for certain industries (retail, restaurants, certain manufacturers).
Automatic enrollment is a great idea and works well when you are trying to capture participant inertia into the plan. If payroll, HR, and recordkeeper are not aligned, then operationally AE can blow up. New plans can be a great opportunity or a disaster lurking.
I like it but I also now auto enrollment is not for every company and administering it can be difficult for some organizations.
Adding in AE to my smaller plans has improved participation and deferral rates leading to better retirement outcomes
While we all know auto enrollment is best, there are many valid reasons why an employer may not want to utilize, especially for a new plan. Not all small companies have the ability to execute properly. I’m often not a fan of mandates. While they generally have the best intentions, there are also always unintended consequences.
This could detract from smaller plan adoption who want the higher deferral limits over SEP/SIMPLE plans, but want discretion to kick in match which auto enroll can increase and already stretched budget
I’m a huge fan of auto enroll. I cram it down the throats of many of my clients. That’s my job not the governments. Many small sponsors will be burdened by this and I look at it as a carrot toward a public option.
What’s not to like!
For startups, this increases costs and the potential for issues.
I like it—but we need to start at an amount that will actually provide a secure retirement, not some measly 3%. Start at 6% and increase to 15%. You’d think people would then opt out, but in my experience they don’t. I have a couple of plans that started at 6% and hardly anyone opted out. These were not doctors and lawyers, either.
As always, we have to “help those who refuse (often) to help themselves.”
This should have been done a long time ago.
2. MODIFY THE CREDIT FOR SMALL EMPLOYER PENSION PLAN STARTUP COSTS
46% - I Like it.
36% - I REALLY like it.
17% - I could take it or leave it.
1% - I don’t like it.
0% - I REALLY don’t like it.
Anything that helps small employers offer a retirement plan.
Not sure I understand the change. I am for anything that increases it.
I think it’s good, but we don’t want to deal with small startup plans and most advisors don’t either. This is okay but not a great fix for small employers.
Super helpful.
Only if they increase it.
If by modify, you mean more.
Since “cost” is the most often cited reason for not doing a Plan, let’s help with that!
Anything that helps small businesses gain access to qualified plans is a good thing.
Appreciate the first-year boost, but pension/CB plans (or 401(k)) are usually fine first year, but it’s the on-going that is tough, as demographics change or business revenue changes.
I think this makes sense. I think anything that incentivizes any employer to adopt a pension is a good thing.
Although I don’t see high adoption rates here, nice for those where this is a good fit.
It’s never been the motivator.
3. INCREASE AND “MODERNIZE” THE EXISTING SAVER’S CREDIT FOR CONTRIBUTIONS TO A RETIREMENT PLAN OR IRA (THE BILL WOULD CREATE A SINGLE CREDIT RATE OF 50%, WOULD INCREASE THE MAXIMUM CREDIT AMOUNT FROM $1,000 PER PERSON TO $1,500, AND WOULD INCREASE THE MAXIMUM INCOME ELIGIBILITY AMOUNT)
46% - I Like it.
36% - I REALLY like it.
17% - I could take it or leave it.
1% - I REALLY don’t like it.
0% - I don’t like it.
Anything that creates an incentive for the participant to contribute is good.
Encouraging savings and giving tax breaks, especially to those most in need of those tax breaks. How’s that not a win-win?!?
While I like the fact that this would benefit more people, I’m not sure it motivates many to take action.
That tax bracket really doesn’t pay much in taxes proportionately. The credit is nice but... I’m not sure it makes a huge difference versus looking like it does.
I feel no one uses this anyway.
I think the income eligibility should be significantly increased to incentivize the savings of workers who are most likely to be more dependent on their social security income.
The Saver’s Credit won’t ever work. Half of American households don’t pay income taxes, so many don’t file a tax form. I was once in the uncomfortable position of telling former Chairman Max Baucus that there was virtually no uptake of the use of the credit. It’s one of those things that sound good but have no impact.
The maximum income eligibility needs to be a true credit that can result in a tax refund.
Not sure this would be the deciding factor to establish a qualified plan, but even a little bit can help.
It still seems too complicated for people in the bracket to understand.
It’s never been a motivator for people who need it.
Credit still not refundable, so still of limited use to low income employees.
The Savers Credit is severely underutilized. Simplification and raising the max. income eligibility will benefit and incent Americans to participate and save more.
Long overdue.
4. EXPAND RETIREMENT SAVINGS OPTIONS FOR NON-PROFIT EMPLOYEES BY ALLOWING 403(B) PLANS TO JOIN TOGETHER TO OFFER RETIREMENT PLANS TO THEIR EMPLOYEES IN MULTIPLE EMPLOYER PLANS (MEPs)
39% - Like it.
37% - I could take it or leave it.
17% - I REALLY like it.
4% - I don’t like it.
3% - I REALLY don’t like it.
Not the biggest MEP fan but if it’s a good fit, it should be an option.
I have mixed feeling about this. I am concerned we may see some very large MEPS who push the idea that an advisor is unnecessary.
I’m skeptical over the whole MEP and PEP. I’ve pulled plans out of MEPs and found their “hidden” costs to be as much 2.50%! I think these are full of traps for the average employer/fiduciary including those who consider themselves somewhat informed on such matters.
...but only for smaller sized plans - less than 100 employees.
I don’t love MEPs
First, one must think that MEP / PEP is a good idea. I don’t think it is. The only thing worse than a disorganized business operation is one that is a normal small non-profit.
It remains to be seen if the MEPs can offer the kind of customization for each participating plan that is needed, given that not-for-profits have widely different operating budgets.
We have CALSAVERS. Expect this to be the “back-stop” for any employer who expects low contributions and wants an “admin” free experience as a retirement plan option.
I work in the smaller market with a majority of my plans under 100 employees. I have not found that the MEPs being more cost or time saving than an individual plan.
This is the sort of thing that got 403b plans in trouble 30 years ago with individual annuities. Long term it will not be in the best interest of the participants.
Just don’t see MEPS/PEPs as a huge deal at this point.
MEPs/PEPs are problematic—and don’t increase efficiencies. Just overhead....
I don’t know. I’m on the fence about the whole MEP thing to begin with.
Especially here in DC, the land of non-profits.
5. ALLOW A HIGHER CATCH-UP LIMIT TO APPLY AT AGE 60 (FROM 2020’S $6,500 TO $10,000—SIMPLES ALSO EXPANDED TO $5,000 FROM $3,000), PROVIDING MORE FLEXIBILITY FOR OLDER INDIVIDUALS TO SET ASIDE SAVINGS AS THEY APPROACH RETIREMENT
64% - I REALLY like it.
29% - I Like it.
5% - I could take it or leave it.
1% - I don’t like it.
1% - I REALLY don’t like it.
Allows those who are getting closer to retirement to sock away as much as possible while still having earnings to defer.
There’s not many who will take advantage of this so the cost in tax revenue is minimal and the opportunity to increase retirement savings is always a huge benefit.
This provision just allows older participants an opportunity to save additional dollars right before retirement.
Only if this is really a two-tiered catch-up system, one level @ 50 and a higher level in addition @ 60.
Late savers need to catch up if they can!
If it costs money that takes away from other changes, I don’t think this is needed.
How does it hurt to give people more ability to save? Good thing.
I’d love to see a catch up limit be $10k to really give older participants a chance to catch up, I would love to see a tiered catch up limit beginning at 45 as that seems to be the age when employees realized they started too late.
Love the higher limit for (k) Plans, hate the higher limit for SIMPLE.
I like raising the limits across the board to help savers, but this one works.
Will help with testing when the plan is not safe harbor.
I really like it because I am in that demographic!
The 402(g) limit is not enough to replace income for those living in high cost states.
As long as the age 50 catch up limit doesn’t go away!
Only if it is in addition, not replacing, the catch-up at 50, a higher limit available at 60 from what is available at 50 would be best.
This is personal.... :-)
Based on who takes advantage of the current catch-up, this is really only for those who are likely going to be able to afford to retire anyway. But more tax advantages to owners makes it more likely they’ll sponsor a plan. Which makes it more likely the rank and file will have something other than dubious social security when it comes to their own retirement.
Hello??!! - is anyone REALLY opposed to this?
6. INCREASE THE REQUIRED MINIMUM DISTRIBUTION AGE TO 75
60% - I REALLY like it.
24% - I Like it.
13% - I could take it or leave it.
2% - I don’t like it.
1% - I REALLY don’t like it.
Life expectancies are increasing... shouldn’t be trying to deplete savings.
I think this makes a lot of sense.
If you don’t need it, why force folks to take it. Oh, yeah, the budget deficit! C’mon, man!
Not sure if this matters to non-owner participants as they can defer their RMD while they are still employed, but it would appeal to owners.
Consistent with actuarial tables and life expectancy these days.
What’s the “pay-for” to offset this?
With longevity this is great. It will be confusing since Secure Act went to 72 from 70-1/2 and this would jump to 75 but worth it.
I think we should do away with a minimum distribution requirement.
How will it get “paid” for? That’s the reason it isn’t 75 already.
What will the “tax neutral” offset to the loss of tax revenue. That will be an important issue regarding what they take away. Last time it was the “stretch IRA.”
I like it but I think it would be very difficult in the current economic environment to pay for it.
Nonissue for retirement plans but good for the individual.
Would prefer that it be abolished, but this will do...
This is personal!
And could be add a minimum account balance of at least $100,000 while we’re at it? It’s kind of ridiculous when someone is “required” to distribute $27.
Ulterior Motive—I may work until 75
7. ALLOW INDIVIDUALS TO RECEIVE AN EMPLOYER MATCH IN THEIR RETIREMENT PLANS FOR PAYING DOWN A STUDENT LOAN
44% - I Like it.
31% - I REALLY like it.
12% - I could take it or leave it.
9% - I don’t like it.
4% - I REALLY don’t like it.
I understand the concept. My answer is more around we need to fix the student loan concept overall.... more education to high school kids, better options, etc.
The idea is good, but the administration issues and opportunity for error seem huge.
I like the idea, but I have not had a single plan sponsor express interest in doing it yet.
I see the need to simplify the complex finances of those who go into debt, especially large debt. This is a minor fix. The real issue is the unyielding spend by Colleges and Universities that cause these debt loads. Let’s tackle the issue at the source.
I am worried about the mechanics of how this would work inside the plan.
The administration of this will be very difficult.
While I had to pay 100% for my college, back in those days college costs were not as debilitating as they are today. Good idea to retire that debt that serves as an anchor around the necks of recent graduates, allowing them to move financially forward in their lives.
I don’t think 401(k) Plan should be used this way. If employers want to help employees with their student loan debt then they should provide separate bonuses to reimburse them for their payments, those payments could in turn be placed into the 401(k) Plan as a contribution if the employee choose to do so. Also, what about the 40-year-old worker who already paid their student loan and now have a mortgage and two kids to pay for? What does he get, nothing?? Debt is debt—either it is all treated the same if something like this is passes or it isn’t.
Cross testing might let them do this now, but it would be nice to help with non-discrimination testing.
Next generation of employees are carrying a ton of debt this is needed.
It would be great if this could be a universal program offered at all employers through all recordkeepers.
Not sure how the extra administrative cost will be handled and whether that can be passed through to all participants or if it will be an employer expense. It only benefits a handful of participants.
I like it, seems complicated to administer for most plan sponsors.
Like long-term part-time (LTPT) employees, the devil is in the details. how prove loan payment, etc.
Student loan debt is a big issue. Paying it down in a retirement plan is not the best way to do it. We don’t let people use their retirement account to pay down mortgages, car loans or credit card debt. And you also have to contend with testing, document and compliance issues. This could get messy.
Why is student loan debt different from a mortgage or a car loan or any other debt? if a company wants to provide employees who have student loan debt a benefit then give them a reimbursement bonus on what they pay to their student loan debt that they can choose to defer into the plan.
Honestly, can’t this be done outside of the retirement plan? Yes, it’s great if a company would like to help an employee pay down student debt but this is also at the expense of saving for retirement. And at some point, people have to take ownership of their decisions and obtain an education without having a mountain of debt. There are options if people would just think about it.
This gets complicated, but for those who team with Student loan debt management programs the feature can work really well. I would require that with it so you get features of debt counseling and other services along with it at a participant level and a service that knows how to track so plans don’t get themselves in trouble operationally.
Too messy and those kids need to save as much as they need to pay down debt.
Can be administratively tricky, but like it otherwise
Why focus on this debt? Why not focus on mortgage debt or credit card debt? This is just a feel-good measure implemented for political reasons without actually addressing the core issues.
R/K nightmare!!!!!!!!!!!!!!!!!
I like it with reservations. As a TPA we see plans getting more and more complicated to administer, yet we are required to keep lowering fees in order to retain any clients.
I would love formal clarification on and the ability for sponsors to easily adopt this provision with a PLR.
This has been the MOST vague discussion yet. Promises Promises. Come on Man!!!!
8. PROVIDE A SAFE HARBOR FOR CORRECTIONS OF EMPLOYEE ELECTIVE DEFERRAL FAILURES
55% - I REALLY like it.
32% - I Like it.
13% - I could take it or leave it.
0% - I don’t like it.
0% - I REALLY don’t like it.
Errors happen all the time... need to help employers for honest mistakes.
We see these more and more often.
I have not had time to analyze this yet.
Maybe I really like it but I’m not as familiar with this as I should be.
What we do is complex. The complexity falls down to overworked, under-resourced, under-trained payroll departments. They will never get it right. Let’s not make it so draconian to fix.
Hopefully the safe harbor correction will not cost too much.
A simpler system would be much easier on the smaller organizations, where this kind of thing happens more frequently, in my experience.
Anything to help make these plans easier to administer is a win.
Yes, larger than SCPs now would be a win for sponsors. Anything that can encourage plan adoption and the penalties for those who accidentally find themselves in this predicament.
Existing correction methods are OK, so not a ton to improve on here.
There should be many, many “standard” self-correction safe harbors.
YES YES YES YES!!!!
9. EXPAND THE EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM (ALLOWING MORE TYPES OF ERRORS TO BE CORRECTED INTERNALLY THROUGH SELF-CORRECTION, AND EXEMPT CERTAIN FAILURES TO MAKE REQUIRED MINIMUM DISTRIBUTIONS FROM THE OTHERWISE APPLICABLE EXCISE TAX
61% - I REALLY like it.
29% - I Like it.
10% - I could take it or leave it.
0% - I don’t like it.
0% - I REALLY don’t like it.
Most errors are not intentional but due to the complexity of the rules and regulations governing retirement plans. This makes administering a plan difficult, especially for small and medium size business owners. Expanding self-correction is a must!
Maybe the IRS can spend time auditing instead of reviewing submissions.
Beneficial as long as it does not result in a greater number of compliance errors.
Honest mistakes can happen. There should be a “reward” of sorts for plans to correct their mistakes without fear of significant penalties. Save the harsh penalties for the truly bad actors.
If you’re going to have more plans doing automatic enrollment you have to allow them more room to fix mistakes.
Always a good thing to be more helpful in correcting errors.
Don’t penalize people for sponsoring a plan or participating in one. Mistakes happen. Give us a way to fix it and move on without a bunch of paperwork, fees and penalties.
10. MAKE IT EASIER FOR EMPLOYEES TO FIND LOST RETIREMENT ACCOUNTS BY CREATING A NATIONAL, ONLINE, DATABASE OF LOST ACCOUNTS (TO BE MANAGED BY THE PENSION BENEFIT GUARANTY CORPORATION (PBGC))
49% - I REALLY like it.
36% - I Like it.
12% - I could take it or leave it.
2% - I don’t like it.
1% - I REALLY don’t like it.
As long as we can ensure the database is secure and there are measures to protect the accounts... absolutely! We need to ensure participants know they have money and where it is.
SO, I really DO like it but not with the PBGC. Thus the rating. A purely private entity (or three or five designated private entities) would be better, much more efficient, and less likely fraught with errors than an operation through the PBGC.
People should be responsible for their own accounts. That said, making it easier to find/track prior accounts is a good idea.
Let’s hope the cost isn’t insane to do it, but it’s a great idea. I’ve had to help employees hunt down old plans and it’s super annoying. Likewise, we hate it when we can’t find someone.
Assuming they could make it work. Gotta be better than what we have.
I get asked about this ALL THE TIME, there needs to be a systematic reporting system that employees can just see where they have a shell account, it doesn’t to say an account value just a name, recordkeeper and contact number.
Geez, the PBGC is so good at this, why not give them more work... wait, aren’t they already in charge of this for terminating DC Plans... how’s that going?
Isn’t this supposed to have happened already... Like since EGTRAA or something? A nationwide system for tracking lost participants would be great. Maybe through a non-profit (um, ARA project) with Federal blessing, so it can actually happen!
Yup, missing participants should NOT be a thing in this day and age.
I really like it especially if it would fall into the “roll into an IRA” option for mandatory distributions yet not nickel and dime the participants’ accounts with little fees each year until they are gone.
Cannot tell you how important this is!!
11. RATHER THAN REQUIRING ONLY AN INITIAL NOTICE OF A PAPER DELIVERY OPTION, THE BILL WOULD AMEND ERISA TO GENERALLY PROVIDE THAT WITH RESPECT TO DC PLANS, UNLESS A PARTICIPANT ELECTS OTHERWISE, THE PLAN IS REQUIRED TO PROVIDE A PAPER BENEFIT STATEMENT AT LEAST ONCE ANNUALLY (THE OTHER THREE QUARTERLY STATEMENTS REQUIRED UNDER ERISA ARE NOT SUBJECT TO THIS RULE AND CAN BE PROVIDED ELECTRONICALLY). FOR DB PLANS, UNLESS A PARTICIPANT ELECTS OTHERWISE, THE STATEMENT THAT MUST BE PROVIDED ONCE EVERY THREE YEARS UNDER ERISA MUST BE A PAPER STATEMENT
24% - I could take it or leave it.
24% - I Like it.
23% - I don’t like it.
15% - I REALLY don’t like it.
14% - I REALLY like it.
I recognize that an annual statement is probably still prudent since there are still many of those who don’t use or have internet. For DB plans, I think the statement should be annually since participants can’t look at or change anything... the update should be more frequent than every 3 years.
I’m old and I’m a paper guy.
This would be beneficial to participants who are not computer savvy.
It could be argued that one paper statement per year keeps participants better informed of their retirement plan or prevents lost accounts.
Every employee of a DB plan should get an annual statement that is printed—not every 3 years.
It won’t get read either way.
Let’s be in the 21st century. There is no need for workarounds by law, let the plans handle it on any reasonable basis. Just say it’s electronic and have the employer or Plan provide reasonable help those that for some reason communicate with smoke signals.
Either allow all electronic or not. The hybrid approach creates confusion and does not really address the effectiveness of notices.
I know everything is moving electronically and I get it—I’m a millennial. But not getting a paper statement is something I hear a lot of participants from later generations complain of. I also realize for older generations—not everyone has access to computer or the internet where they can access and view their account, so I think this makes sense to provide at least one paper statement.
Yes, electronic communication is ideal and easier. However, I do think mailing a hard copy statement is a good idea.
Requiring anything in paper is out of touch, we need to modernize our retirement system and make things easier for participants and sponsors. You can actually make information much more robust in an e-delivery environment!
Only really terrible provision—concession to the paper industry, perhaps?
ROUTINE is best. This creates an exception—difficult to administer....
Oh, come on! Didn’t we just get rid of this? Save a tree for crying out loud.
(Other) Other Comments
I like that there are several aspects in this bill to make things easier, more efficient and cost effective for plan sponsors. Not a perfect bill but we’re trending in the right direction.
Top heavy is a hidden tax and keeping some employers from attracting and retaining key (pun intended) top talent. This needs to go or be heavily revised in 401k programs.
These are some really exciting provisions. I’m anxious to see how quickly Congress moves forward with anything.
Simplify the paperwork for new plans, conversions and especially rollovers.
1) Change nondiscrimination testing = increase permissible spread to a higher % (currently 2% between NHCE and HCE). 2) Traditional Safe Harbor = Allow for a 2-year cliff vesting (without forcing QACA as the only SH option with vesting). 3) Change so that only one loan outstanding is the universal rule (phase out multiple loans).
Need some legislation to help employers during COVID. Doesn’t apply to SECURE per se but issues around partial plan termination relief, testing relief for 2020 is still needed. CARES Act helped participants but we need to help small business as well!
Many of these represent “pension-izing” the 401(k) which many participants have been asking for over and over again—“make it easie,”, “do it for me.”
Eligibility for long-term part time workers and safe harbors for related compliance testing issues.
As discussed above, just get rid of the RMD already! And, just allow any investment that a 401(k) plan can have in a 403(b) please!
Mostly I really like that retirement is one of the issues being considered, and not just on an “emergency” (CARES Act) basis.
A User-Friendly Guide—albeit, I know you are already working on it—that I can share with Plan Sponsors.
Thanks to everyone for participating in this week’s NAPA-Net Reader Poll!
