Major bipartisan retirement legislation — the Securing a Strong Retirement Act of 2022 (SSRA) (HR 2954) — has passed the House in a 414–5 vote. This sets the stage for Senate action and raises hopes that Congress can build on the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act (Div. O of Pub. L. No. 116-94) and approve a final “SECURE 2.0” package this year. The wide-ranging bill contains provisions aimed at expanding plan coverage, boosting savings, increasing lifetime income options and streamlining plan administration. Several revenue-raising proposals would direct more workplace savings into after-tax Roth accounts. In addition, the Department of Labor (DOL) would have to review its fiduciary guidance for defined benefit (DB) pension risk transfers. This GRIST highlights key SSRA provisions of interest to employers. Updates to this article on April 18 clarify the scope of the bill’s provisions relating to 403(b) plans’ investment in collective investment trusts.
The House-passed measure carries over most provisions from an earlier version of the bill approved by the Ways and Means Committee and substantially similar legislation — the Retirement Improvement and Savings Enhancement (RISE) Act (HR 5891) — cleared by the Education and Labor Committee. Action now shifts to the Senate, where the Health, Education, Labor and Pensions (HELP) and the Finance committees are working on their own SECURE 2.0 proposals. The committees will need to reconcile those bills, perhaps while negotiating with the House on final legislation that the president could sign later this year. Stand-alone retirement bills don’t often pass the Senate, and finding a larger legislative vehicle this year to include the retirement provisions could be a challenge. However, a post-election lame-duck measure tying up legislative loose ends could carry a SECURE 2.0 package over the finish line.
The SSRA would let sponsors of 401(k), 403(b), governmental 457(b) and savings incentive match plans for employees (SIMPLE plans) match employees’ qualifying student loan payments as if the payments were salary-reduction contributions. Employers offering the benefit would have to make it available to all employees eligible to receive matching contributions on salary deferrals. The match rate and vesting schedules for both salary deferrals and student loan payments would have to be the same. Plans could apply the actual deferral percentage (ADP) test separately to employees who receive these matching contributions. The benefit would apply only to repayments of student loan debt incurred for higher education, and employers could rely on an employee certification that the loan repayments were made.
New 401(k) and 403(b) plans adopted after the SSRA’s enactment would have to offer automatic contribution and escalation features beginning in 2024. The requirement would also apply to employers that first begin participating in a multiple-employer plan (MEP) after enactment, even if the plan was established before enactment. Small employers with fewer than 10 employees, new employers in business less than three years, and sponsors of governmental and church plans would be exempt from the requirement.
Plans (or new employers in a MEP) subject to this requirement would have to automatically enroll new participants at a deferral rate between 3% and 10%, with auto-escalation at a rate of one percentage point per year up to a specified cap. For safe harbor automatic contribution arrangements, the maximum would be 15%. For non-safe harbor arrangements, the cap would be 10% for plan years ending before 2025 and 15% for later plan years.
Employees could opt out of automatic enrollment or choose a different contribution percentage. Plans would have to allow those employees to withdraw their contributions within 90 days after the first automatic deferral.
The SSRA would allow some part-time workers to participate in workplace retirement plans a year earlier than they currently are eligible. Sponsors of noncollectively bargained 401(k) and 403(b) plans would have to let part-time workers voluntarily contribute to the plan if they have completed at least 500 hours of service in two consecutive years (reduced from three) and have attained age 21. Pre-2021 service would not be counted, but some part-time employees could still be eligible as early as the 2023 plan year.
The bill would make the following changes to the distribution rules for defined contribution (DC) plans:
The bill would make a number of changes to Internal Revenue Code Section 401(a)(9) rules for required minimum distributions (RMDs):
The bill directs DOL to review its current guidance on how ERISA’s fiduciary standards apply when a DB plan sponsor outsources some or all of its pension risk by purchasing annuities from an insurance company or other provider. These pension risk transfers have drawn fire from some policymakers who say that participants’ benefits are potentially at risk if the annuity provider goes out of business or otherwise cannot meet its contractual obligations.
The SECURE Act created a safe harbor for DC plan fiduciaries selecting annuity providers, but it didn’t apply to DB plans. The SSRA would require DOL to determine whether Interpretive Bulletin (IB) 95-1 (29 CFR § 2509.95-1) needs amendments and report the findings, including an assessment of any risk to participants, to Congress within one year.
Qualified longevity annuity contracts (QLACs) let employees use a portion of their retirement savings to purchase an annuity starting as late as age 85 without violating the RMD rules. The bill directs Treasury to amend its QLAC regulations within a year of the bill’s enactment as follows:
The bill would significantly expand the Self-Correction Program (SCP) under IRS’s Employee Plans Compliance Resolution System (EPCRS) and add a new safe harbor correction for elective deferral failures:
The bill would give retirement plan fiduciaries the latitude to decide not to recoup certain inadvertent benefit overpayments. If plan fiduciaries choose to recoup overpayments, limitations and protections would apply to safeguard retirees and their beneficiaries, including a prohibition on charging interest and curbs on threatening litigation and using collection agencies. Notably, fiduciaries wouldn’t be able to recoup overpayments from a participant or a beneficiary if the first overpayment occurred more than three years before the participant or beneficiary first receives written notice of the error.
These limitations wouldn’t apply to participants and beneficiaries who are culpable for the overpayment (including those who knew or should have known that the payments were materially in excess of the correct amount). The limitations also wouldn’t apply to recoupment arrangements in place prior to the SSRA’s enactment.
Several provisions aim to simplify reporting and disclosure requirements, though the bill also would require DC plans to deliver at least one annual paper benefit statement:
The bill would require DOL, in consultation with Treasury, to establish within two years an online searchable database of information about retirement benefits. Plan administrators would have to provide DOL with information about current and former participants to enable the agency to construct and operate the database — called the Retirement Savings Lost and Found. Individuals who had been a retirement plan participant or beneficiary would be able to search the database to get contact information for the plan’s administrator.
Several of the bill’s provisions relate specifically to 403(b) plans:
Some provisions will be of special interest to small employers:
Other miscellaneous provisions that might be of interest to employers include: