Compliance News | July 25, 2022
SECURE 2.0, shorthand for three bills that would have significant implications for retirement plans, continues to work its slow but steady path through Congress. It now appears that SECURE 2.0 will be enacted late this year. Plan sponsors should be aware of the many changes included in this pending legislation.
This insight addresses the most significant provisions that would affect midsize and large DC plans.
SECURE 2.0 has numerous provisions aimed at encouraging more savings in 401(k), 403(b) and governmental 457(b) plans through automatic enrollment, automatic escalation and improved safe harbor. It also includes a provision that makes it easier for an employer to make matching contributions to plans when an employee makes a payment on a student loan. Another highlight is two different provisions allowing emergency savings.
These provisions are intended to encourage more savings:
The bills include many other provisions that would affect DC plans, including these:
The three SECURE 2.0 bills are:
There are numerous provisions in these three bills, some identical, some with minor modifications and some with no parallel.
These provisions continue the work done by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which is why SECURE 2.0 is shorthand that many retirement industry professionals use to describe the provisions. (We discussed the SECURE Act in our March 4, 2020 insight.)
Members of Congress are expected to negotiate a bicameral, bipartisan version for passage in the House and Senate. That version could include provisions that are in none of the bills currently and revisions to the existing proposed changes. Enactment is not likely until after the November election.
Because retirement bills rarely are brought up for a vote by themselves, if SECURE 2.0 moves forward, it is likely it will be added to an end-of-year “must-pass” bill. This could be the appropriations bill, a tax bill or some other “must-pass” bill.
We discuss more SECURE 2.0 provisions in other July 25, 2022 insights: “SECURE 2.0 Provisions That Would Affect DB Plans” and “SECURE 2.0 Would Change the RMD Rules, Corrections and More.” The second insight covers some provisions that would apply to both DC and DB plans.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.