Federal bill that would require employers to offer passes for retirement benefits


The “Securing a Strong Retirement Act of 2022”, also known as “Secure 2.0”, was passed by the United States House of Representatives on Tuesday. If made law, employers would be required to automatically put 3% of eligible workers’ wages into 401(k) plans and increase the contribution each year until at least 10% is reached with an option of up to up to 15%.

HR 2954 passed the House 414-5 with nearly equal support from Democrats and Republicans. It would also require automatic enrollment in 403(b) and SIMPLE plans as soon as employees become eligible. Employees would have the ability to opt out of a plan. The bill does not 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:

    • Create new tax credits to encourage small employers to offer retirement plans, fully offset paperwork costs, and provide a per-employee credit of up to $1,000 for employer matching contributions;
    • Help employees save for retirement earlier;
    • Allow greater flexibility to keep more of their savings longer by raising the age of minimum required distributions to 75;
    • Helping late-career workers catch up on retirement savings;
    • Help low-income households to build up their savings with the “bigger and simpler” Crédit Épargne;
    • Allow employers to match pension plan contributions to employee student loan repayments;
    • Simplify how small businesses offer employee stock ownership and provide new tax incentives for those who do;
    • Prioritize military families by providing a small employer tax credit that makes plan benefits more accessible to military spouses.

Fourteen bills have been introduced, 11 in the House and three in the Senate, which relate to Secure 2.0 and may add to or otherwise change the bill in the future. CNBC reports that a Senate vote is expected to take place 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 the rules for small businesses and helping those close to retirement save for longer, this legislation will help increase Americans’ access to retirement funds and help families save for the future.

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

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

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

In recent years, 14 states have passed laws requiring the provision of pension plans. Most state plans are for small businesses with five to 100 employees who have not yet implemented their plans.

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 age for distribution from 70 1/2 to 72. , removed the IRA contribution age limit, mandates that inherited retirement account distributions must be taken within 10 years, allows new parents to take withdrawals without penalty, and opens up eligibility for 401(k) to long-term part-time employees, according to US News & World Report.

Eckenrode said the CSIS 401(k) is a much easier route for employers in the collision industry to take to provide their workers with retirement benefits, because without it business owners will have a lot of work ahead of them if the federal bill becomes law, including interviewing plan providers, developing a plan, and spending time complying with the law.

“While with the CSIS plan, we’ve already done all of that,” Eckenrode said. “What we’ve tried to do is provide a cost-effective solution that has fiduciary backing and reduces administrative responsibilities for participating member companies.”

One advantage of the SCRS plan is that multiple companies are in one plan, so the total plan balance and number of employees are higher, according to Eckenrode. And it has already been negotiated that as certain benchmarks are reached, 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.


Featured Image Credit: CatLane/iStock

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