PLANSPONSOR - June - July 2022 - 40

INSIDE ANGLE
In Progress
Anticipated retirement legislation may soon be a reality
I
n 2019, Congress passed the Setting Every Community Up
for Retirement Enhancement Act, a groundbreaking piece
of retirement legislation that included provisions such as the
creation of a lifetime income safe harbor and pooled employer
plans, as well as changes to the required minimum distribution
rules. Since the SECURE Act became law, the retirement
industry has anticipated further legislative enhancements to
the retirement system. Three years later, both the House and
Senate have recently issued bills that could further change the
retirement system.
On March 29, the House overwhelmingly passed H.R.
2954, the Securing a Strong Retirement Act of 2021-quickly
redubbed " SECURE 2.0 " -in response to the stated need from
the retirement industry.
Subsequently, on June 7, the Senate Committee on Health,
Education, Labor and Pensions formally introduced the RISE
and SHINE-for Retirement Improvement and Savings
Enhancement to Supplement Healthy Investments for the Nest
Egg-Act, which looks to build off of the House bill. The Senate
HELP committee approved the proposed bill on June 15. Still,
the legislation has several hurdles to clear before becoming law.
Below we discuss both bills, giving the key provisions in
each and our outlook on next steps.
SECURE Act 2.0
Key elements of the House SECURE 2.0 bill include the following:
Mandatory automatic enrollment. Starting January 1, 2023,
employers with a new defined contribution plan, as of that date,
would need to automatically enroll new hires, with many small
plans excluded from the requirement. The default deferral rate
would be 3% of the employee's pay on a pretax basis, increasing
annually by 1 percentage point up to at least 10% but no more
than 15%. Employees could affirmatively elect a different contribution
amount. If a participant has not made an investment election,
contributions would be defaulted into a qualified default
investment alternative.
RMD changes. The RMD age would increase from 72.5 to 73,
starting January 1, 2023; to 74, starting January 1, 2030; and to 75,
starting January 1, 2033.
Student loan employer matches. Employers could match
40 PLANSPONSOR.COM June - July 2022 Art by Joseph Ciardiello
workers' student loan payments and make the contributions to the
person's 401(k) plan account. The potential of this inclusion has
excited sponsors looking to assist employees with student debt.
RISE and SHINE Act
The RISE and SHINE Act as currently written has many of
the same provisions as SECURE 2.0, but it also has several key
differences, including:
Automatic re-enrollment. Rather than requiring automatic
enrollment, RISE and SHINE would mandate that employers automatically
re-enroll workers every three years to prompt employees
who have opted out to periodically reconsider their choice.
Emergency savings. An emergency savings component would
be connected to DC plans. Here,
" pension-linked " savings
accounts of up to $2,500-subject to cost-of-living adjustments-that
participants could use for unexpected expenses
would be treated in the same manner as after-tax contributions,
and plan sponsors could automatically enroll a participant with a
compensation deferral percentage not to exceed 3%.
Changes to filing requirements. RISE and SHINE also intends
to decrease the regulatory burden on plan sponsors. Notably, it
directs the Treasury and Labor departments to amend regulations
to permit sponsors to consolidate certain required participant
notices; it also clarifies that plans filing Form 5500 under a
group of plans arrangement need only submit an audit opinion
if they have 100 participants or more.
Outlook
Material changes could continue to be made throughout the
legislative process before a final bill may be passed. In particular,
as of June 14, the Senate Finance Committee had yet to release
its own proposal. This may contain further edits to the provisions
outlined above and is expected later this summer. While
many potential considerations remain, it will be valuable for the
regulated community to watch for developments as they arise.
Steve Saxon is a partner in Groom Law Group, Chartered,
and George Sepsakos is a principal in Groom. Offices for
Groom are in Washington, D.C.
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