What You Need to Know
- Auto enrollment doesn’t address the problems of opt-outs and leakages, says Teresa Ghilarducci.
- PBGC should not hold lost accounts and invest the balances in U.S. Treasury bonds, said AEI's Biggs.
- IRI is optimistic that the House will act on bipartisan retirement legislation, which includes Secure Act 2.0, this year.
The Secure Act 2.0 provides important benefits to help boost Americans’ retirement savings, but the huge retirement bill does have drawbacks, retirement experts told House lawmakers.
Secure Act 2.0 — officially, the Securing a Strong Retirement Act — was part of a review of the nation’s retirement system during a hearing held Wednesday by the House Health, Employment, Labor and Pensions Subcommittee.
On May 5, the House Ways and Means Committee passed the Secure Act 2.0, which raises the required minimum distribution age from 72 to 75, expands automatic enrollment in retirement plans and enhances 403(b) plans, among other provisions.
While “Secure Act 2.0 is a good baby step, ensuring employees the benefits of automatic enrollment,” Teresa Ghilarducci, director of The New School’s Schwartz Center for Economic Policy Analysis, told ThinkAdvisor Wednesday, “it doesn’t address the problems of opt-outs that can decrease coverage and leakages that allow people to deplete their savings before they retire.”
Added Ghilarducci, who testified at the hearing: “We need to build towards a comprehensive solution that gives workers a path to a secure retirement, and that means creating universal pension plans that professionally invest people’s savings over the long term.”
David Certner, legal counsel and legislative policy director at AARP, told lawmakers that AARP supports Secure Act 2.0, or H.R. 2954, as it would “extend greater coverage to more part-time workers and automatically enroll workers in new employer retirement savings plans once they have been in business for three years and employ more than 10 employees.”
Automatic enrollment, Certner said, “dramatically increases enrollment of the workforce,” usually sparking a jump in employee participation in company retirement plans from “anywhere around 50% to around 80%.”
Automatic payroll deduction, Certner said, “is a proven method of increasing coverage and participation” in workplace retirement plans.
Certner said AARP urges lawmakers to improve coverage for the 27 million part-time workers who generally are not covered by retirement savings plans.
“This is especially important for older workers and caregivers who often shift from full-time to part-time work or return to the workforce less than full-time due to caregiving responsibilities,” Certner testified. “Moreover, women are far more likely to work part time than men — two-thirds of part-time workers are women.”