The “Securing a Strong Retirement Act of 2022,” also known as “Secure 2.0,” was passed by the U.S. House of Representatives Tuesday. If it becomes law, employers would be required to automatically put 3% of eligible workers’ pay in 401(k) plans and increase the contribution every year until at least 10% is reached with the option of up to 15%.

H.R. 2954 passed the House 414-5 with nearly equal Democratic and Republican support. It would also require automatic enrollment in 403(b) and SIMPLE plans as soon as employees become eligible. Employees would have the option to opt out of a plan. The bill doesn’t apply to businesses that are less than three years old and/or have 10 or fewer employees.

According to the House Ways and Means Committee, the bill would:

• • Create new tax credits to encourage small employers to offer retirement plans, fully offsets paperwork costs, and provides a per-employee credit of up to $1,000 for employer matching contributions;
  • Help employees save for retirement earlier;
  • Allow for greater flexibility to keep more of their savings for longer by raising the age of required minimum distributions to 75;
  • Help late-career workers catch up in saving for retirement;
  • Help lower-income households build their savings with the “bigger and simpler” Saver’s Credit;
  • Allow employers to match retirement plan contributions to employee student loan payments;
  • Simplify how small businesses offer stock ownership to employees and offer new tax incentives for those that do;
  • Prioritize military families by providing a tax credit for small employers that make plan benefits more available to military spouses.

Fourteen bills have been filed, 11 in the House and three in the Senate, that are related to Secure 2.0 and could add to or in some way alter the bill moving forward. CNBC reports a Senate vote is expected to happen in April.

In a March 25 letter, House Majority Leader Steny Hoyer (D-MD 5th District) wrote, “By expanding automatic enrollment in employer provided retirement plans, simplifying rules for small businesses, and helping those near retirement save more for longer, this legislation will help increase Americans’ access to retirement funds and help families save for the future.”

House Ways and Means Committee Chair Richard Neal (D-MA 1st District) wrote on Tuesday that retirement security has been one of his top priorities since becoming chairman of the committee. “Too many workers in this nation reach retirement age without the savings they need. In fact, about 50 percent of households are ‘at risk’ of not having enough to maintain their living standards in retirement.”

Currently, employees aren’t required to enroll in a 401K plan under federal law. “Right now, 401(k) plans are more of an opt-in; that’s the more common practice,” said Coley Eckenrode, a partner and financial advisor with Virginia Asset Management and a Society of Collision Repair Specialists (SCRS) 401(k) plan advisor.

“If that [H.R. 2954] becomes law, then it just throws another burden on small businesses who are already dealing with labor shortages, supply chain issues, day-to-to activities to run their business that have gotten a little bit more complicated and evolved through COVID and the aftermath of that.”

In recent years, 14 states have passed laws that require retirement plans to be offered. Most state plans are aimed at small businesses that have five to 100 employees and all of them haven’t implemented their plans yet.

The new federal bill builds on the Secure Act that was passed in 2019 with an effective date of Jan. 1, 2020. The law changed the minimum distribution age to 72 from 70 1/2, removed the IRA contribution age limit, mandates that inherited retirement account distributions must be taken within 10 years, allows new parents to take penalty-free withdrawals, and opens up eligibility for 401(k)s to long-term part-time employees, according to U.S. News & World Report.

Eckenrode said the SCRS 401(k) is a much easier path for collision industry employers to take to offer their workers retirement benefits because without it business owners will have a lot of legwork ahead of them if the federal bill becomes law including interviewing plan providers, coming up with a plan, and spending time to reach law compliance.

“Whereas, with the SCRS plan, we’ve already done all that,” Eckenrode said. “What we’ve tried to do is offer a cost-effective solution which has fiduciary support and reduce the administrative responsibilities of the member businesses that participate.”

A perk of the SCRS plan is several companies are in one plan so the total plan balance and number of employees are higher, according to Eckenrode. And it’s already been negotiated that as certain benchmarks are met, such as the number of dollars or participants, employees will see price reductions.

To learn more about the SCRS 401(k) plan, contact Coley Eckenrode at 804-327-0425 or coley.eckenrode@vamllc.com or Scott Broaddus at 804-327-0424 or scott.broaddus@irongate-capital.com.

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