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Retirement Security, of (and for) the Next Generation

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It seems to go without saying that comity and cooperation have deteriorated in Washington, D.C. over the past 25 years.

Lynn Dudley

Senior Vice President, Global Retirement & Compensation Policy, American Benefits Council

Whether this is a cause or symptom of what ails the nation, there is — if not a cure — something that ought to make us feel better, now and in the future.

Retirement policy has a proud legacy of bipartisanship dating back almost a half-century, to the development of the Employee Retirement Income Security Act of 1974 (ERISA). Over the past 25 years, the nation’s private-sector retirement savings system has resulted in greater financial security for millions of American workers.

There has been dramatic growth in retirement savings since 1995, including a 75% increase in the mean savings for the lowest-income families and over 100% growth for middle-income families.

In addition, coverage of low and middle-income families has increased materially, ranging from a 12% increase for middle-income families to a 20% increase for the lowest income families.

These gains are the result of three market-driven forces working in concert: employer competition for talent, innovation in financial services, and thoughtful public policy. The latest product of this partnership is consensus retirement policy legislation dubbed “SECURE 2.0.”

Named after the SECURE Act of 2019, this legislation has thus far taken the form of three different bipartisan bills: the Securing a Strong Retirement Act, passed by the House on March 29; the RISE and SHINE Act, approved by the Senate HELP Committee on June 14; and the EARN Act, approved by the Senate Finance Committee on June 22. Each of these measures passed easily, by wide margins, the latter two unanimously.

While these bills differ in some subtle respects, they share the common objectives of expanding coverage and reducing barriers to retirement savings for workers. Among the most impactful provisions for low- and middle-income workers are measures to help employees overwhelmed with student loan debt to start saving for retirement, expanded tax credits to encourage low- and middle-income employees to save for retirement, broadened coverage of part-time workers, and financial incentives for small employers to start a plan.

Less obvious but still critical are a series of technical fixes that will help both employers and employees avoid unnecessary taxes, penalties, and red tape and simplify plan administration. And before a single, compromise bill is developed, it could include additional proposals like new guidelines for “automatic enrollment” in 401(k) plans and “emergency savings” programs employees can use to pay unexpected bills.

Predicting what Congress will do, and when, is a daunting proposition. But if the bills’ sponsors get their way, a final measure will go to the floor for a final vote in the lame-duck congressional session this year.

By that time, we’ll be past another election and another half-dozen debates may be dominating the public discourse. It may go unnoticed, but when President Biden signs SECURE 2.0 into law, it will be a signal that lawmakers in Washington, D.C. can still work together today to build a better future tomorrow.

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