IRI Says Bill Will Advance Financial Equity, Security for Workers and Families
WASHINGTON, D.C. – Nearly 40 million small business employees will gain access to a workplace retirement savings plan under legislation to be considered today by a House committee. The proposed measure also would give employees the opportunity to choose a protected lifetime income solution within a plan that mimics the benefits offered by a more traditional pension.
The provisions are part of the reconciliation bill that contains many of President Biden’s and congressional Democrats’ Build Back Better Plan priorities.
The automatic contribution plan measure is championed by House Ways and Means Committee Chairman Richard Neal (D-Mass.), who had first introduced it in 2017. At that time, the Insured Retirement Institute (IRI) was the first industry organization to support Chairman Neal’s bill and today expressed its continued commitment to its enactment.
The legislation is an IRI priority that is included in the organization’s Retirement Security Blueprint. President Joe Biden also called for a similar framework to be established during the 2020 presidential campaign when he included the concept in his “Plan for Older Americans.” IRI noted this similarity in a statement it issued when the President’s plan was released last year.
Wayne Chopus, IRI President and CEO, hailed the committee’s action. “We appreciate Chairman Neal’s steadfast leadership and advocacy of this legislation to help America’s workers, retirees, and their families build economic equity, strengthen financial security, and protect income in a sustainable manner to last throughout retirement years,” he said. “We look forward to working with Chairman Neal and other supporters to enact this important initiative.”
The measure requires employers with five employees or more to provide or arrange for access to an automatic retirement contribution plan for all full-time and long-term part-time employees. Workers could decline to participate or drop out at any time after enrollment.
A recently released IRI survey showed that more than half of workers older than 40 had less than $50,000 in retirement savings, but most expected to have an annual retirement income of $50,000 or more. Nearly two-thirds of workers regretted not saving more and wished they started saving sooner.
The legislation also would require employers to offer employees with at least a $200,000 vested retirement account balance the option to take a distribution of up to 50 percent of savings to purchase a lifetime income solution. This feature can provide a sustainable protected income stream that cannot be outlived.
According to IRI’s recent research, older workers have a high level of interest in having protected lifetime income solutions, such as annuities, included in workplace defined contribution retirement plans. The survey revealed that seven in 10 workers of the youngest age cohort (40–45) said they are very or somewhat likely to allocate a portion of their plan to annuities. Eighty-seven percent believe it is important that the income from savings is protected for life.
“Policymakers have created numerous incentives, options, and mechanisms for employers to offer workplace retirement plans. But too many employees, particularly those who work for small businesses, are still not covered by a plan,” Chopus said. “This puts too many workers in jeopardy of not saving enough for retirement, which can last 20 or 30 years or longer. We need to take additional steps to address the inequitable access to an effective means to accumulate retirement savings, and this legislation is a common-sense step to do just that.”
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, signed into law in 2019, contained several measures to facilitate the establishment of retirement savings plans for small businesses. The law included an expanded tax credit to cover some costs of setting up a plan. It also created pooled employer plans (PEPs) that small business employers can use to share a retirement plan’s administrative burden and costs. These new tools will make it easier for small business employers to comply with the new requirements established by the proposed measure.
“We urge Congress to advance this initiative,” Chopus said. “This legislation will have a significant, positive effect on the long-term well-being of millions of small-business workers who will now have more opportunities to save for and achieve a secure and dignified retirement with income to sustain them throughout their retirement.
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Contact: Dan Zielinski
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