Automatic enrollment and emergency savings provisions made it into the final version of a closely watched legislative package designed to boost participation in workplace retirement plans and reduce the cost and administrative burdens of sponsoring them.
The Securing a Strong Retirement Act, known as SECURE Act 2.0, appeared as part of the Senate’s omnibus spending package for fiscal year 2023, which was released early Tuesday. Congress has until Friday to pass the spending package or a continuing resolution to push its deadline into next year.
Retirement access legislation broadly enjoys bipartisan support as lawmakers have expressed concern over Americans’ lack of savings, fearing a growing “retirement gap.” Around 57 million working age Americans don’t have access to employer-sponsored retirement savings plans, according to AARP research.
Most retirement savings are generated at work, so facilitating convenient access to a starter account is thought to put more workers on the right track to building a nest egg over the length of their careers.
A key provision to automatically enroll new workers into 401(k)s is a large part of the bill now before Congress. The provision would enroll savers at a rate of 3% to 10% of their annual pay initially, and contains exemptions for newly created businesses and companies with 10 or fewer employees.
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