Secure Act 2.0 Is Popular, but Not Perfect, Retirement Experts Say

Like the Secure Act of 2020, which "was the most important and far-reaching retirement saving legislation since the Pension Protection Act of 2006," Secure Act 2.0 "is in that same tradition," Andrew Biggs, Resident Scholar at the American Enterprise Institute, told the lawmakers.

The bill's "worthy improvements," Biggs said, include expanding automatic enrollment in 401(k) plans to all new employees, increase tax incentives to employers who offer retirement plans, and "expand retirees ability to convert their 401(k) balances to an annuity that offers benefits for life."

Secure 2.0, he continued, would also open up multiple employer plans to nonprofits who offer 403(b) plans as well as simplify reporting requirements for small businesses.

While another positive aspect of the bill is that it would establish a new database of lost retirement accounts, Biggs said he's wary of the bill's plan that the Pension Benefit Guaranty Corp. hold lost accounts and invest the balances in U.S. Treasury bonds.

"Private entities have greater experience as account administrators," Biggs told the lawmakers. "Moreover, given that many lost accounts are from young employees and may sit for years before being claimed, I would prefer to see these accounts remain invested in a retirement-appropriate portfolio mix of stocks and bonds that could grow over time. This would cost more initially but would bring benefits to savers over time."

Aliya Robinson, senior vice president of Retirement and Compensation Policy at the ERISA Industry Committee, or ERIC, in Washington, told ThinkAdvisor Thursday in an email that positive aspects of Secure Act 2.0 are the "matching contributions for student loan payments, expanding the self-corrections process, consolidating notice requirements, increasing the required minimum distribution (RMD) age [to 75], increasing catch-up limits in plans, clarifying the recovery process for retirement plan overpayments, and creating a pension registry."

However, Robinson said one area of concern in the bill pertains to electronic delivery.

Secure Act 2.0 "rolls back final DOL rules issued on electronic delivery by requiring plan sponsors to deliver at least one paper quarterly benefit statement per year for defined contribution plans. Not only does this provision impose an annual paper disclosure that is not required by the regulation, but it also requires a disclosure that contains individualized information and can often exceed several pages."

If Congress decides that an annual disclosure is necessary, Robinson continued, "we urge them to consider a short and generic notice — i.e., a 'postcard notice' — which can be provided more easily and quickly than a benefit statement."

Paul Richman, chief government and political affairs officer at the Insured Retirement Institute, added in a statement that IRI remains "optimistic" that the House will act on bipartisan retirement legislation, which includes Secure Act 2.0, this year.