The totally different approaches to increasing entry to retirement plans
In Voya’s recent insight into thought leadership, “Hope for the Future: The Opportunity for Transformative Improvement in Retirement Plans,” the company says retirement industry executives are optimistic that legislation and serious employer engagement will increase job availability in retirement planning .
“Despite expected headwinds from economic challenges and societal turmoil, panellists strongly suggest that we can make significant progress on retirement plans by 2030,” said Voya in his report. “Respondents believe that this advancement is being supported by a combination of factors, including advances in technology, legislative initiatives and greater employer engagement. Many believe these factors will play a key role in expanding access to plans and engaging more employees. “
Experts agree that expanded coverage is certainly needed in this country. The Georgetown University Center for Retirement Initiatives estimates that 57 million private sector employees, or 46% of the private sector population, do not have access to a retirement plan through their workplace. This is especially true for workers in small businesses, as well as lower-income workers, younger workers, minorities and women, according to Georgetown.
In order to increase the availability of company pension plans, different companies are pursuing different approaches.
A dozen states have state retirement plans, and Oklahoma state lawmakers recently introduced bills in both houses of law to create a state retirement program for employers who do not offer a retirement plan.
As with the other government plans, participants would be enrolled for automatic enrollment and individual retirement accounts (IRAs) for payroll. Like other government programs, the initiative is also aimed at small employers. The Oklahoma Bill requires employers with at least 10 employees who have been in business for at least two years to make the state plan available to their employees.
In addition, there is the promise of Pooled Employer Plans (PEPs), which will be made available from January 1 under the SECURE Act (Setting Every Community Up for Retirement Enhancement).
Micah DiSalvo, Chief Revenue Officer at American Trust, anticipates her adoption will increase once sponsors and advisors realize how much PEPs can expand coverage.
“They will improve the accessibility and efficiency of smaller plans and give them access to some institutional services that are normally only available on larger plans,” says DeSalvo. “We expect consultants, recorders and administrators from third parties [TPAs] will pay increasing attention to PEPs – and that adoption will look like a hockey stick over time. A big part of what will drive this adoption forward is the fact that 51% of workers in private companies do not have access to a retirement plan. “
Indeed, some retirement plan executives say that as PEPs become more universally applicable, a fiduciary duty for retirement plan advisors and sponsors to weigh the pros and cons of joining a PEP or an individual employer plan.
There is also a rush of laws that would expand the coverage of retirement plans.
Just last week, Senators Susan Collins, R-Maine, and Mark Warner, D-Virginia, introduced the SIMPLE Plan Modernization Act to give small businesses and their employees who want to use SIMPLE more flexibility and access [savings incentive match plan for employees] Plan as a retirement option.
Congress established SIMPLE retirement plans through the Small Business Job Protection Act of 1996 to encourage small businesses to provide retirement plans to their employees. They are available to companies with 100 or fewer employees unless they have another employer-sponsored retirement plan.
Last week, too, the US Senators Collins; Maggie Hassan, D-New Hampshire; James Lankford, R-Oklahoma; and Michael Bennet, D-Colorado presented the Military Spouses Retirement Security Act, a non-partisan law designed to help spouses of active duty members save for retirement by improving their access to employer-sponsored retirement plans.
Under the law, small employers – with 100 employees or fewer – would be entitled to a tax credit of up to $ 500 per year per military spouse. It would be available for three years per military spouse, and the loan amount would be $ 200 per military spouse plus 100% of all employer contributions for that spouse up to $ 300.
Also in 2019, the US Senator Sheldon Whitehouse, D-Rhode Island, introduced the “Automatic IRA Act of 2019”, according to which employers who have no other qualified pension plan and have more than 10 employees automatically enroll employees in health insurance need auto IRA. Employers in states that already have a state pension plan would be exempt.