The Insured Retirement Institute (IRI) has released its 2023 Federal Retirement Security Blueprint — a public policy agenda that IRI says aims to help ensure workers have economic equity and financial security to sustain them after retirement.
“The new laws… have enabled our nation’s workers and retirees to take significant steps forward on the path to addressing the many challenges and obstacles they face in seeking a secure and dignified retirement,” IRI wrote in the agenda. “But much more can still be done to bolster their retirement security.”
IRI touts recent federal legislation — Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019 and effective Jan. 1, 2020, and SECURE 2.0 Act of 2022, effective in December of last year — as “the most sweeping changes to enhance the private sector retirement system in more than a decade,” setting up U.S. workers to save billions more than before.
The SECURE Act changed the minimum distribution age, which was later updated to age 73 this year with SECURE 2.0 and to age 75 in 2033; removed the age limit for IRA contributions; requires inherited retirement account distributions to be taken within 10 years; allows new parents to take penalty-free withdrawals, and created 401(k) plan eligibility for long-term part-time employees.
Beginning after Dec. 31, 2024, SECURE 2.0 requires employers with more than 10 employees that have been in existence for at least three years and offer a new 401(k) or 403(b) plan, to automatically enroll workers in a 401(k) retirement plan with an opt-out option. The deduction would be at least 3%, but not more than 10% of an employee’s pretax earnings, as soon as they become eligible. That amount would then be increased annually by 1% until it reaches at least 10%, but not more than 15%.
Businesses that employ 10 or fewer people and companies that have been in business for less than three years would be excluded from the mandate.
IRI makes its public policy suggestions in five categories:
- Expand Opportunities to Save for Retirement
- Facilitate Greater Use of Protected, Guaranteed Lifetime Income Solutions
- Foster Innovation, Modernization, Education, and Advice
- Boost Protections to Safeguard Consumers, Diverse Representation, and Participation
- Maintain and Augment the Current Tax Treatment of Retirement Savings
Due to nearly half of U.S. employees not being offered a traditional pension or retirement savings plan, IRI wants Congress to enact legislation that would require all but small employers to automatically enroll their workers into a retirement savings plan. And for employees that opt-out, IRI thinks employers should be required to offer automatic enrollment again every three years.
Specifically, IRI supports a provision of the Build Back Better Act that made it to committee because it would not only offer retirement financial stability but would “help address the anxiety felt by many of America’s workers about outliving their retirement savings by requiring that participants with account balances of $200,000 or more be given the choice to receive up to 50% of their vested balance in the form of a protected, guaranteed lifetime income product.”
Another piece of legislation IRI supports is one that would provide qualified family caregivers the opportunity to make catch-up contributions for a period equal to their time spent as a caregiver before reaching age 50.
Some other issues IRI would like to see Congress address with legislation include to:
- “allow plan sponsors to utilize annuities that provide a guaranteed return on investment and have a delayed liquidity feature as a default investment vehicle; for a portion of contributions made by a retirement saver who has not made investment selections;
- “consider fiduciary duties met of employers that offer protected, guaranteed lifetime income solutions as a default distribution option for as long as employees are notified of the default annuitization option and have the right to opt-out;
- “streamline how consumers receive electronic communications by removing outdated requirements and ensuring retirement savers can continue to choose how they want to receive and access their financial information;
- “direct the Secretary of Education to create a centralized financial resources portal on the Department’s website for recipients of federal financial aid that will provide information about planning and saving for their retirement as part of its financial literacy content;
- “establish uniform standards for security, privacy, and notification requirements that preempt the growing patchwork of state regulatory regimes;
- “increase resources to investigate and prosecute the bad actors committing account takeover fraud;
- “develop an appropriate federal regulatory framework to effectively oversee cryptocurrencies and the cryptocurrency market in general;
- “continue to promote retirement savings by maintaining its tax-deferred treatment as a necessary tool that helps America’s workers to plan for and achieve a secure and dignified retirement;
- “simplify the Internal Revenue Code (IRC) §199A to treat thousands of businesses across the country equally by allowing any business to take advantage of the pass-through deduction;
- “establish a new tax credit for employers who offer automatic re-enrollment as a feature of their workplace plans.”
Wayne Chopus, IRI’s president and CEO, told 401KSpecialist that the institute “looks forward to engaging Congress to advance new legislation that delivers additional retirement solutions.”
“Our changing national demographics mean more consumers will need access to retirement plans and reliable retirement income from the savings those plans generate,” Chopus said. “That means a strong future for our industry and a very busy agenda for IRI.”
In a preview of Vanguard’s “How America Saves 2023” report, released earlier this year, the investment management company said 6% of investors in self-directed retirement accounts traded last year — the lowest level in more than two decades.
Barron’s called the 2022 market “the worst market since 2008” with S&P’s 500 losing nearly 20%, U.S. bonds dropping nearly 13%, and most retirement target-date funds, which adjust their mix of stock and bonds as the owner approaches retirement, fell somewhere in between.
Collision industry 401(k) plan option
The Society of Collision Repair Specialists (SCRS) offers a 401(k) Multiple Employer Plan (MEP) that takes care of the legwork for business owners in the collision repair industry. Plan advisors have already completed the legwork of interviewing plan providers, coming up with a plan, and spending time to reach law compliance.
A perk of the SCRS plan is several companies are in one plan so the total plan balance and the number of employees are higher. 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.
SCRS says its vision for the plan is to help participating businesses and employees save expenses relevant to their 401k balances, reduce administrative responsibilities for companies, and provide fiduciary support.
Virginia Asset Management Partner and Financial Advisor Coley Eckenrode, who helps manage the SCRS plan, said this year is a good time to be contributing more money for retirement because total contribution amounts allowed for the year increased from $20,500 to $22,500 for savers under the age of 50. Also, the catch-up for those over 50 increased from $6,500 to $7,500, meaning if you’re over 50 you can contribute $30,000 this year.
Other SCRS plan highlights include, according to the MEP website:
- “Ability for each business to customize their own plan features;
- “Administrative support to help with transition, onboarding and employee education;
- “Executive Committee within SCRS that conducts quarterly review of plan and investments;
- “Pre-negotiated declining fee schedule, meaning as the plan grows costs automatically go down;
- “SCRS prepares the annual tax filing (5500);
- “One audit for the entire plan, which saves companies who have to do their own audit thousands of dollars per year.”
Visit www.scrs.com/401k to contact the advisory team and fill out a basic request for more information.
Featured image credit: CatLane/iStock