Greetings all! Hopefully this new entry into the blog will be the start of a renewed interest in blogging AND, candidly in response to the overwhelmingly positive response I received from many of my clients and colleagues to "blog, blog, blog".
For my first attempt, I thought I'd tackle the new SECURE 2.0 legislation that went to and came out of committee (House Ways & Means) this week as a multi part series. While there are more steps to this Act becoming a law, I feel pretty confident that this one has legs, and candidly, that's GREAT news for the retirement plan community and our clients. I think this will get done in 2021 with implementation of many of the provisions in 2022.
For a an amazing summary of all of the new provisions contained within the final mark-up, here's a link What's in SECURE 2.0?.
The What:
Committee Chairman Richard Neal (D-MA), along with the Committee’s ranking Republican, Rep. Kevin Brady (R-TX), first introduced the bill, Securing a Strong Retirement Act (SSRA), last October as a sequel to the 2019 SECURE Act. While that version of the bill included some 36 provisions, the new Securing a Strong Retirement Act of 2021 (H.R. 2954) now contains about 45 provisions, including new revenue offsets to pay for the bill.
My Favorite Few Provisions:
As mentioned, while this has 45 provisions, I thought I'd cherry pick out a few of my favorites. These will be discussed one part at a time as part of a series of posts.
Student Loan Payments: In the original version submitted in October it contained a provision that would use the retirement plan ecosystem to encourage younger workers to pay off student loans, a novel and candidly, very good idea. The original bill however didn't account for a potential negative impact on compliance testing (ADP test). This new version addresses this problem, clearing the path for employers to adopt this provision effective for 2022.
So what is this? Simply, it's a matching program where the employer could create a formula where they would match some/all of what the employee pays off of their student loan. This allows employees with student loan debt to not have to fully choose between saving for retirement OR paying down debt, both important for their short and long term financial well being. Personally, I love this idea. Savings rate is by far the most important factor in a successful retirement (Quantifying the Drivers of Retirement Success), and the earlier years are the most important. One big inhibitor to younger workers participating in plans is the skyrocketing costs of higher education that has occurred over the past few decades leaving many with a huge loan to deal with right at the beginning of their careers. This new provision can allow many of these employees who are new to the workforce to pay down debt whilst simultaneously not missing out on the employer match and thus being able to get some money saved for retirement.
The big question, which we'll learn the answer to soon, is whether employers will want to altruistically adopt this OR if they will take the position that participants personal finances are not 'their problem'. Frankly, the more astute employers will grab this idea and tout it loudly because this is the exact type of benefit that breeds employee loyalty. I'd be curious as to what others think about this.
Stay tuned for Part 2 of this Series.
- Jason Grantz, QPA, QKC, QKA, AIFA
No comments:
Post a Comment