BBJ – Jim Brett: New retirement savings law will reap benefits for U.S. workers
By James T. Brett, Boston Business Journal
In late December, Congress passed and President Joe Biden signed into law a sweeping $1.7 trillion omnibus spending bill. Included in this landmark legislation was a package of bills referred to as SECURE 2.0, designed to bolster retirement savings for American workers and retirees.
SECURE 2.0 builds upon another law passed and signed into law in 2019, The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which gave part-time workers access to retirement benefits, and increased the age when required minimum distributions must start, among other measures.
Both SECURE 1.0 and 2.0 were authored and shepherded through Congress by U.S. Representative Richard Neal, D-Mass., who has served as the chairman of the House Ways and Means Committee for the past four years. Expanding access to retirement savings tools has been a top priority for the congressman for many years, and he should be commended for his leadership to ensure that SECURE 2.0 was included in the year-end spending legislation.
The New England Council has advocated in support of SECURE 2.0 for the last several years, and we believe that its implementation will have a tremendous impact, not just here New England, but across the nation. One of the many economic consequences of the COVID-19 pandemic is that many American workers faced job losses or financial hardships, and as a result, cut back on retirement savings during this time period. This legislation includes a variety of tools that will help these individuals get back on track with planning for the future.
SECURE 2.0 will benefit a wide range of American workers, regardless of where they are in the retirement savings process. Here are a few of the ways SECURE 2.0 will help enhance and expand retirement savings:
Under SECURE 2.0, employer-sponsored retirement plans — 401(k) and 403(B) plans — will be required to automatically enroll participants in the plans upon becoming eligible, ensuring that more workers take advantage of these savings tools.
Many workers who are still paying off student loan debt struggle to save for retirement. Under the new law, employers will still be able to contribute to an employee’s 401(K) retirement plan, even if the employee is not yet able to contribute themselves.
Conversely, the bill would also allow workers more flexibility with unused 529 college savings accounts, allowing them to roll the funds into a Roth IRA tax- and penalty-free.
Recognizing that many Americans find themselves facing unexpected financial and health challenges, the new law will allow workers to withdraw from a retirement savings plan in the event of an emergency or health crisis.
SECURE 2.0 increases the “catch-up” contributions that older workers can make to their plans as their retirement age approaches.
While SECURE 1.0 increased the age when required minimum distributions must start from 70.5 to 72, SECURE 2.0 goes a step further, increasing the age to 73 in 2023, and to 75 in 2033.
Each of these measures represents significant improvements in retirement-savings policy that will ensure that Americans are better prepared for a financially stable retirement. We are grateful to Congressman Neal for his tireless work to advance this legislation, and to our region’s entire Congressional delegation for their support of the omnibus spending bill that got SECURE 2.0 over the finish line.