Given the massive breadth of the SECURE 2.0 Act of 2022, analysis has taken some time, but experts are starting to predict that the greatest potential impact on retirement outcomes will be derived by workers currently in their 30s, who can especially benefit from the automatic features and saver’s match.
Solving Retirement Insecurity?
The ultimate goal of the SECURE 2.0 legislation is to make it easier for more Americans to save for retirement, and doing so is critical:
A 2023 Federal Reserve survey found that almost three-fourths of adults who aren’t retired have at least some retirement savings. However, 28% (up from 25% in 2021) have none whatsoever. At the same time fewer than a third (31%) of those who aren’t retired feel their retirement savings are on track, down from 40% in 2021. Lower savings—combined with longer lifespans—are fueling a retirement security crisis in the U.S.
SECURE 2.0 provisions include changes to the protocols related to required minimum distributions, catch up contributions, employer matches, auto-enrollment, emergency distributions, student loan payments, Roth-IRA conversions, and, a new saver’s match provision, which kicks into action in 2027, allowing low and middle income workers to receive a federal match against their savings. Emerging research from the Employee Benefit Research Institute (EBRI) finds that taken in total, SECURE 2.0 provisions are especially likely to have a positive impact on the futures of workers currently in their 30s: “because the benefits of the legislation will need time to compound, and younger workers have time on their side.In addition, the automatic enrollment provision does not apply to plans that existed at the time SECURE 2.0 was passed, which means this powerful provision does not apply to most plans that currently exist.”
Though the automatic features and saver’s match are likely to prove especially beneficial for younger workers, these provisions are estimated to make a dent in the retirement security gap overall, because they are “uniquely powerful at bringing more low-income people into the retirement system. The saver’s match ‘helps the most vulnerable group contribute more savings’ by matching their contributions, and this match can be in addition to an employer match.” Specifically, under the provisions of the saver’s match:
In 2027, savers with an income below $20,500 or $41,000 for married couples qualify for a 50% match to their individual retirement account or an eligible workplace plan from the federal government up to a maximum match of $1,000. The income thresholds will adjust for inflation beginning in 2027. The match is cut gradually until an individual has income of $35,500 or $71,000 for married couples to prevent a sudden loss of the match. The saver’s match replaces the saver’s credit.
Protection for Plan Sponsors
Plan sponsors are finding themselves with extra work to do, as they move into compliance with SECURE 2.0 and address the high expectations of employees. Given the responsibilities, adding protection is a very wise idea too. Under the high standards of ERISA, mistakes or oversights can quickly lead to investigations and allegations.
Shield your personal and business assets with affordable Fiduciary Liability Insurance from Colonial Surety Company, where a one-year policy, inclusive of 50k Cyber Liability Insurance, costs less than an hour of ERISA defense attorney fees in the event of a mishap. Colonial Surety’s affordable Fiduciary & Cyber Liability Insurance packages are specifically designed to help plan sponsors with:
- Comprehensive Protection: All our packages include Fiduciary Liability Insurance, ensuring your business and personal assets are shielded from the repercussions of fiduciary breaches. If you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be protected with defense costs and penalty limits up to $1,000,000.
- DOL Compliance: The Department of Labor stresses the importance of Cyber Liability Insurance, considering its absence as a fiduciary breach. Our coverage not only safeguards the plan but also protects your business.
- Cost-Control: Our packages are available for 1, 2, and 3-year terms, providing flexibility and locked-in rates.
If you already have an ERISA bond package with Colonial, you can even lock in your rates by upgrading to the 2 or 3 year package.
Protect yourself, your business and your plan for the go forward:
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