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people between 35 and 64. Overall, EBRI's
simulation suggests that the program could
reduce the deficit by about $456 billion-12%
of the estimated total.
Automatic Portability
In 2019, the Department of Labor granted
Retirement Clearinghouse, a provider of
automatic rollover services to institutions
and plan sponsors, exemptive relief to create
a safe harbor network to make moving retirement
savings from one workplace to another
the default option.
Spencer Williams, RCH's founder, president
and CEO, in Charlotte, North Carolina,
and Neal Ringquist, executive vice president
and chief revenue officer, in Lafayette, California,
tie the concept of auto-portability to
EGTRRA's provisions for involuntary cashouts.
Workers needed a better investment
option, they say.
RCH started researching the autoportability
process in 2014 with Fidelity and
Vanguard. This past October, the firm established
its Portability Services Network, and,
by March, Williams and Ringquist expect
to have a total of six participating recordkeepers,
covering 75% of employees.
Jack VanDerhei, director of retirement
studies at the Morningstar Center for
TELLING A PEP FROM A MEP
The Setting Every Community Up for Retirement Enhancement Act of 2019
introduced pooled employer plans, a multiple employer solution to help
expand retirement plan access. The provisions built upon existing legislation
that created multiple employer plans. Below, we break down some of the
similarities and difference between the two plan types.
Similarities
l Both allow different entities to
combine their employees into a
single retirement plan to leverage
the buying power of a larger group
while serving the needs of each
smaller organization.
l Smaller entities get the advantages
of larger plans, such as better plan
services, at a lower cost to employees.
Both plan types are also easier to
operate than a traditional singleemployer
plan.
l Employers receive tax breaks
for electing to join these plans.
l A PEP or MEP with fewer than 1,000
participants on the first day of its plan
year is exempt from audit requirements
so long as no single employer
has more than 100 participants.
Retirement and Policy Studies, in Washington, D.C., considers
auto-portability critical to keeping retirement savings safe in a
retirement plan.
" It's always been the cash-outs, the leakages, that have been
the single most destructive thing in the 401(k) system, " he says.
SECURE 2.0 signed auto-portability into law. For now, the
Portability Services Network will charge a small fee to some plan
participants, which has caused some controversy. Plan participants
pay a fee from their account balance to participate, with a
maximum one-time charge of $30, Ringquist says.
Norman Stein, senior policy adviser and acting legal director
for the Pension Rights Center in Philadelphia, says, " Developing
a good solution to the portability problem in private-sector
retirement plans has been something of a search for the holy
grail. We hope this approach is effective, but we also hope that
Congress will continue to explore and advance other approaches
to addressing portability issues. "
Pooled Employer Plans
The first SECURE Act introduced the concept of pooled employer
plans to reduce small employers' administrative workload and
Differences
l The plan sponsor for a MEP must be
an industry association or a professional
employer organization; either
may accept outsourced fiduciary
services for the plan.
l PEPs allow unrelated companies to join
together to offer a retirement plan.
l Pooled plan providers must be a
named plan fiduciary. PPPs are a new
entity created by the SECURE Act
and must register with the Labor and
Treasury departments. They may be a
third-party administrator.
l PEPs must have at least one trustee
who is not an employer-member of
the plan and who will collect contributions,
hold these assets, and require
written contribution collection procedures
from each PEP member.
costs, but, since the plans launched at the beginning of the
pandemic, their uptake has been slow, Delaney says. However,
SECURE 2.0's offer of a tax credit when a small business joins
a PEP should make the plans more attractive, as they address an
administrative pain point for those employers, she says.
Hammond is optimistic that SECURE 2.0 provisions will
result in improved retirement saving. He points to coverage
now available for some part-time workers and emergency
savings programs linked to the company retirement plan-all
aimed at helping lower-income employees save.
An emergency savings program could help take pressure
off the retirement plan, as some workers end up tapping
their plan for hardship reasons, he says. Under the emergency
savings provision, these withdrawals will be tax-free.
Part-time employees who complete at least 500 hours of
service each year for three consecutive years, and who will be at
least 21 by the last day of that period, will qualify to participate
in a workplace plan.
Although not all part-timers will be eligible for a plan,
this is a step in the right direction. " It's
Hammond says,
another bite of the apple, " he says. -Debbie Carlson
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