Retirement Legislation Update with Voya’s Jeff Cimini and Mark Sides

In this episode Bill is joined by Voya’s own Jeff Cimini, SVP, Retirement Product Management and Mark Sides, SVP, Deputy General Counsel, to help unravel the latest in retirement legislation and provide an update on what may be coming later this year in terms of some new retirement support for Americans. Specifically, they’re here to dive further into “what means what" and mostly, "what entails what” when it comes to the Enhancing American Retirement Now Act, which was passed by the Senate in June, but not published until early September, as well as related bills in the Senate (RISE & SHINE) and the House (Securing a Strong Retirement Act).

Bill Harmon and Jeff Cimini are registered representatives of Voya Financial Partners, LLC (member SIPC).

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Transcript

Speaker 1: 0:01

You're listening to the Hire Through Retire podcast with Voya Bill Harmon tackling all things from 401ks to HSAs and everything in between. We're talking to the best and brightest in the industry to bring you the latest in benefits, savings, and investment trends in the workplace. Come along with us on our journey to help all Americans become well planned, well invested, and well protected.

Speaker 2: 0:25

Hello everyone and welcome back to the Hire Through Retire podcast. I'm your host, Bill Harmon. And hey, thank you so much for joining me here today. If you could see my background, my virtual background, you would see a fall foliage because we're right here, we're in the heart of fall. I was just up in the mountains and seeing that all the aspens are changing. So I guess with that, we should probably get into the podcast cuz there's a lot to talk about. There's never a shortage of topics, but this one's really timely cause there's been a ton of activity, real notable activity in Congress recently as it relates to new and existing retirement legislation. So we thought we'd invite some special guests on. This was a really timely situation and uh, we need to have a good discussion about that. So for those of you that have been following the news, you know, we're referring to the enhancing American retirement now, or earn, as you might hear it, in some of the, uh, periodical. And it was passed by the Senate in June, but not published until early September. But that's not all. We're here to talk about. The earn act as well as related bills in the Senate, which is rise and shine and the house securing a strong retirement act are all part of the discussion. You might be wondering, well, okay, that's a lot. What's that mean to me? And mostly once it all entail. So joining me here today are to my colleagues that can help us unravel a bit what may be coming later this year in terms of some new retirement support for Americans. So first we have a former guest and one time cohost of this very pod, Jeff, the SVP of Retirement product management at Voya. Jeff, you're kind of, if we were to think of Saturday Night Live, you're like the Alec Baldy, you're like the Steve Martin. You've been on this show so many times, I think we need to get you a special jacket, but it's good to have you back. We also have Mark side, the SVP and Deputy General Counsel joining us here today as well. So, hey Jeff, great to see you again. Mark, welcome to the pod.

Speaker 3: 2:18

Thanks, Bill.

Speaker 2: 2:20

Thanks Bill. Well, I was really expected to get some type of Steve Martin or Alex Baldwin quit from you, Jeff, but maybe later in the pod. We can get to that. Tell you what, rather to talk about SNL longtime host, let's jump right into it. And, and Mark, if I could start with you, you know, with the publication and um, of the Text of the Earn recently, we now have three bills in Congress, the Securing a Strong Retirement Act, the Rise and Shine Act, and the Earn Act for all of us looking at this like how do we sort this all, Can you share a high level overview of what kind of provisions are included in each of these bills and particularly as it pertains to employer sponsored plans?

Speaker 3: 2:57

Thanks, Bill. I'll be happy to do that. And the first thing I wanna point out is even though there are three separate bills, two in the Senate, one in the House, they're all still being referred to under the kind of the combined term of secure Act 2.0. So everybody recalls, I am sure Secure Act, uh, original, uh, was passed in 2019 and is now pretty much in, uh, law and, and moving forward. And this is secure Act 2.0, the sequel. It is a big act, all three of'em together, our summaries are running like 138 pages. So I'm gonna try to, uh, not recite 138 pages worth of, uh, text to you, but narrow it down to those that our listeners may, uh, care more about. So the first one is, um, expanding auto enrollment in retirement plans. All three bills contain additional automatic enrollment provisions beyond what we saw in Secure 1.0, um, with the house bill requiring auto enrollment for new plans. So if you start up a new K plan or a 4 0 3 B plan following the passage of this law, you're going to have to actually have an auto enrollment provision, which is a new, uh, from existing law. The Senate bills also have provisions around automatic re-enrollment in addition to automatic first time enrollment for certain employees. If the employee opts out of a plan doesn't enroll, or if the employee is under a certain contribution rate after three years, the Senate bills will actually allow for automatic re-enrollment or automatic escalation. And one of the Senate bills, um, has a$500 per year tax credit for small employers who establish certain auto enrollment and re-enrollment arrangements. In sticking with incentives for a moment, there are some small business incentives for retirement plans within the various bills. The House and the Senate earn bill provide for tax credits for small employers to participate in pooled employer plans and generally increase existing credits for starting new plans for smaller employers. And in some cases smaller employers are pretty small. It it, it could be 50 or uh, even 25 participants. Those are some things that'll be reconciled in the final text. Turning now to another provision, all three bills will allow 4 0 3 B plans to be part of a pooled employer plan. Uh, you may recall that secure one, uh, provided for pooled employer or pep treatment for corporate plans for 401K plans, but 4 0 3 B plans were left out of that, uh, secured 2.0 would fix that, would allow four three B plans to participate and importantly would provide relief from the one Bad Apple rule to facilitate such participation. Another topic that has been big in the news recently and secure it to addresses it is student loan payments, right? We've seen a lot about that in the news. The House and one of the Senate bills both contain provisions that would permit employers to make matching contributions under certain retirement plans on qualified student loan payments. And so I think, you know, along with some of the other student loan relief we've been seeing in the news, that's gonna be a welcome way for employees in particular to both, you know, keep paying on their student loans but start to build some retirement nest egg going forward. So we uh, we really think that's a good development. Another development that will again expand the universe of people who get access to retirement plans is part-time workers. So you may recall secure one said that if someone's been a part-time employee for three or more years, they have to be allowed to participate in a retirement plan. Secure 2.0 is gonna take that three year service requirement and par it down to two years after a certain time period. Another, uh, hot topic these days is emergency savings and distributions. Uh, among other reasons we saw with Covid, obviously a lot of Americans needed to get emergency money quickly, Many tapped their retirement plans and because of the way that the emergency distribution provisions work, there was some relief that was required to effectuate that. Both of the Senate bills have provisions that will address emergency savings. The Senate Earn Act is gonna provide for an easier process for participants to receive up to a thousand dollars annually for emergency purposes. The withdrawn amounts generally must be repaid through subsequent contributions, but, uh, the nice thing is it makes it a little easier for people to get their money under emergency circumstances without having to go through a lot of the hoops, if you will, that currently exist. The Rise in China Act, the other senate bill is actually gonna permit employers to establish an emergency savings account in which a participant can contribute up to$2,500 post tax for emergency purposes. The employer also would be allowed to match contributions to the account, which would be taxable. And then, uh, another, uh, and and maybe final one to summarize is catch contribution changes. You're gonna be hearing a lot I think about catch contribution changes. So the house bill and one of the Senate bills is actually going to increase catch contribution limits from the current$5,000 amount to$10,000 for persons who have attained a certain age. And it would only be for three years. So in one of the bills it's 61, 62 and 63, you can have three years worth of$10,000 of catch up contributions. The other bill is 62, 63 and 64. They'll obviously have to reconcile that, but that will allow, uh, people to, you know, catch up a little bit more quickly during those years. In addition, the senate earn bill will require all catch up contributions for employees earning more than a hundred thousand dollars annually to be made on a Roth basis. And it's also gonna require that any plan that currently allows catch up contributions or that will allow catch up contributions going forward on a pretax basis to have that Roth feature implemented for such contributions in some late breaking news, if you will, and maybe not part of the cluster of bills called Secure 2.0. Last week, senators two, me and Scott and Representative Meyer introduced the Retirement Savings Modernization Act, uh, which would clarify that 401K plans can invest in alternative assets such as real estate and private equity funds and digital assets. And some of you may realize that's being offered in response to some Department of Labor guidance coming out that cast some doubt on the use of those non-traditional assets in 401K and other arisa plans. So I think that's probably a good place to draw to a close on the summary. Bill, I'll turn it back to you.

Speaker 2: 10:11

Well, so I guess you only went through about 20 of the 138 pages right there, Mark. I mean that's a lot to unpack right there for the listeners and, but I guess we were, to sum it all up, it's really pleasing to hear that the government appreciates that, you know, what, the American worker is not going to be properly prepared to, to retire and do so on time. And then if you look and say, well, what is some of the things that get in the way? Well, it could be that I'm not enrolling early enough or I'm not enrolling at a high enough deferral rate or I don't have access to a plan through my employer. So these incentives for more employers to offer them and make it easier for employers to offer them as well through things like PEPs with the four B provision or that maybe some of these things are, I'd love to participate, but I can't because I'm paying off student loan debt and that that is just shackling me and, and or even the point of an event happened. And so now I go need to take money outta my retirement plan and that's the way my retirement. So they're looking at all of these mid listeners should hear like, what is every possible threat for me to be able to have my employees retire on time, um, and be financially prepared to do so. The government's taking a pretty good look at how can we make it least from our perspective, make it easier for employers, these plans and employees to go and participate. So that's a whole ton of stuff. Mark, one more question for you. A lot of this, and I, and I like how you sum it all up, that it's all under sort of the umbrella of secure 2.0. What are the next steps? Like, that's a lot and and you just said Senate and you just said house. So how, you know, I guess what can we expect to hear more about and is there potential for one of these bills or maybe even a newer version like the one you just mentioned, like what's gonna happen would be your crystal ball prediction.

Speaker 3: 11:57

While all three bills that we mentioned have a number of overlapping provisions, they also have a number of provisions that maybe they're similar in what they're, um, attempting to achieve, but they have different ways of doing it. Like the catch up, you know, contribution ages that I mentioned earlier. And there are some where they're just, you know, they're in some, in, uh, some provisions in one bill and not the other, and they, they have some things that are not on the same page. Those they're gonna go into their proverbial, um, you know, smoke filled back room, get all three bills together, hammer out the differences, align everything, and they're gonna come up with one proposed bill either late November or early December after the elections. After the election's over. Most people think there's a pretty good chance that there is going to become one combined secure 2.0 bill that passes both houses of Congress. It is a bipartisan issue. Both parties agree that we need to do more to enhance Americans, uh, retirement savings. And so the betting is that you're gonna see a bill, it's gonna get approved by both houses, it's gonna go to the president, the president is going to sign it. I would suspect that the last bill I mentioned, the, uh, Retirement Savings Modernization Act will not be in Secure 2.0 that at the moment does not have bipartisan support. Um, it has a support of only one party probably gonna be left on the cutting room floor at this point.

Speaker 2: 13:26

Okay, that's helpful. Thanks Jeff. Let's turn over to you. You gotta imagine our audience is listening to everything that just described and there's, there could be a bit of excitement like, hey, this is really gonna help out, but there might be a little bit of trepidation like, Wait a second, I'm nervous that that's a lot. So if our audience that's primarily employers plan sponsors some, um, advisors, what do you think the most important things for them to know that, hey, once this bill gets signed in the law, what might the rollout, um, and what kind of expectations, what might they have to do with their plan? I they might be a little shell shocked cause some of these gave very little notice to get, to get them kind of into their plan. What are your thoughts, Jeff?

Speaker 4: 14:06

Uh, great question though. There's a lot packed into the question. So let me, let me parse out a few of the things that are here. First is really more of an opinion. If I look back in the way that the private sector has worked with, uh, organizations like Congress or the Department of Labor as it relates to these issues, I think it has been a bipartisan collaborative effort to really cover three things. One is to expand the coverage. Two is to provide kind of better outcomes, and three is to be able to allow employees to make the strongest decisions they can. We've moved from a defined benefit program model for retirement in the United States where really the government and employers took care of everything to almost a self-service model. And I, I, I think we're learning as we go and I think the government is opening to working with us to make improvements and some of the things that Mark outlined to really get wider coverage that's out there and a better outcome for participants by, you know, helping them with some of the decisions they make. And secondly, Bill, you know, I think you, you made a really good point about the rollout. You know, I think we've learned from past situations like this that the timeframe for record keepers plan sponsors to think through what particular provisions do they want to put into their plan and how quickly can the industry get ready to support these decisions is an important part of the enactment date of some of these things that are there. Secure one was a great piece of legislation. Many of us in the record keeping industry are still working on some of those provisions to make'em available, and that's almost three years after the fact. And so I think we've clearly given the message to both Congress and the Department of Labor that we need time to build the technology to be able to support some of these decisions. And, and lastly, given, given your question, I guess I'd I'd add here too is many of these provisions are decisions that a plan sponsor needs to think about whether or not they put'em into their plan. These are not absolute or obligatory, most of them are optional at the plan sponsored level. Now we believe most of these are really in the best interest of the participants. You know, Mark, Mark talked about these things. You know, expanded coverage was a goal of this legislation. So if you look at things, you know, like a small business incentive, if you look like expanding the coverage to who qualifies under the part-time employers, if you look at auto enrollment, all of those expand either the coverage at the individual plan level or at the participant level who is eligible for the plan as a whole. And, and then the second part of this too is helping employees with outcomes. We have learned that contribution levels, um, electing to, to participate in the plan are highly dependent on some of your short term financial issues that you face. We know the largest cohort of eligible participants that don't participate is the 25 to 35 year old. That's why things like student loan debt are so important to retirement outcomes. We need to get participants in early enough and they a feel strapped because they don't have an emergency savings account or they're strapped with an awful lot of student loan debt. We know that that spills over into the behavior they, they take towards their retirement plan. So as we encourage and talk to our plan sponsors about these relevant and important decisions, some of them may seem unrelated to retirement, but we would suggest that they're all interrelated to retirement outcomes. If their participants do not feel secure in the short term, they're definitely not gonna make the best decisions they can for their long term.

Speaker 2: 17:45

Yeah. Let's talk about one item. Um, Jeff, Ben and Mark El also wanted, get your thoughts on it too. One of those decisions is when all of a sudden event, a life event happens, my car breaks down or my roof is leaking, or something like this, that that's when all of a sudden uhoh, I didn't have an emergency savings, I didn't have a bucket of money that like the what if something happens? And we saw this get really popular during the pandemic that more and more people, while I heard people talking about I should have an emergency savings, they started doing that. And then employers got really interested in these emergency savings to really the sense protect the retirement plan. So don't take it from that, don't take it in the form of a hardship distribution, we're gonna get taxed and penalized. Don't take it in the form of a loan that maybe you default if you change jobs. So obviously the government's hearing about all of this and what can they do to help? So as I understand that the Senate bill or the EARN act, that includes a provision from the finance committee that would allow a participant to withdraw a thousand dollars annually from a certain retirement plan for these emergency purposes. And then the withdrawal an amount generally must be repaid through subsequent contributions. Now, the rise in shink from the Senate Health Committee also has emergency savings account feature that would allow an emergency savings account within a retirement plan in which a participant can then elect to save up to$2,500 on an after tax basis and would allow employers to match those contributions to the emergency accounts in a sense to say, Hey, I employer am very interested in you having this account to take care of those things so you don't take it out as so we protect your retirement plan, but the three bills to make it through Congress today. Jeff, gimme your thought too. What's currently in discussion to move forward?

Speaker 4: 19:26

A good question. I don't know if we know the outcome bill of the dollar amount or the frequency or the way that if someone does tap it for an emergency situation, how that's going to be replenished.

Speaker 3: 19:38

I think that, um, you may see both. So if you think about the earn act, it, it's, it's, I'm gonna put quotes around this word, of course, it's sort of a free thousand dollars out, right? Like it, it's pretty self-executing. Obviously there's gonna be some administrative details around managing the ins and outs and things like that, but it executes itself at the participants sort of, you know, need, suddenly they have a a need, they get the thousand dollars out and that works pretty well for a real immediate unforeseen purpose. The Rise and Shine act out of the help committee is really to build that emergency savings nest egg that so many people in our country do not have. And so I think they can work together to really serve Americans. Now obviously the$2,500 account under Verizon Shine is going to be a little bit more to implement and things like that. And employers are really gonna want to think about if that's what they want. I think if you're concerned about your employees wanting to both start to save for retirement and protect those earnings and also have some emergency savings, the$2,500 account is where your long term solution might be while you have the$1,000 under the, um, the earn act. That's just my 2 cents.

Speaker 2: 20:56

Anything on

Speaker 4: 21:05

Savings provisions that are being contemplated is that they adhere to certain principles. One is that they're easy to set up and having emergency savings as a part of a retirement plan just leverages the infrastructure that exists, particularly payroll deduction. Two participants should have easy accessibility to those assets by definition, if it's an emergency, they need it. And so we think provisions that allow access at the participant level without much friction is going to be something that's gonna be very beneficial to folks contemplating electing to set up the emergency savings account. But the third part of it needs to balance out the frequency of use of the emergency savings with the purpose of an emergency savings. By definition, this is supposed to be for an unforeseen emergency. And so there are some provisions about how often a participant can use this. And we have been an advocate for a frequency that's more commen with emergencies than would using it as a checking account. But I think you can make it easy for folks to set up. If it's easy for them to access it, they'll use it more. And our feeling, and we know this bill, you, you cited it very well through what we learned through the covid situation. The more that folks have a backdrop, they will use that backdrop when they have an unforeseen emergency. If they don't have a backdrop, oftentimes the only backdrop they have is a retirement savings account. And we know that that's detrimental to long term savers.

Speaker 2: 22:38

You know, and I like how you said it just, and we talked about this on another, um, podcast episode where more and more employees are really looking to their employer as a trusted source. So to have, it's being easy to be set up, to have to really understand kind of the interdependency of, for instance, an HSA that's gonna take care of any of my out of pocket healthcare costs and emergency savings to take care of any of my, my car broke down, my, my route leaking. But you know what, it's not coming out of my retirement account. That's that purpose there is for me to live on when I'm in retirement and these other items, access threat, I go through my employer to go ahead and find these and create kind of this interdependent series of, uh, workplace savings account. Just Mark, thank you so much for, uh, taking the time to be with us and really help break down what I'm sure a lot of our listeners right now are saying, Wow, that's, that's a lot of stuff and you, I like how you broke it down into kind of digestible, applicable kind of, um, dialogue. So thank you very much. I appreciate it guys.

Speaker 4: 23:43

Thanks for having me,

Speaker 3: 23:45

Bill. Thanks Bill.

Speaker 2: 23:47

So it concludes yet another episode of a Hire Through Retire podcast to our audience out there, as always, I wanna thank you for tuning in. We do hope this provided some clarity for the lingering questions about what's out there and what's to be expected. While we know we're in a bit of a wait and see period when it comes to this type of legislation, our goal is to always help you stay informed and you can count on us, be back to tackle this topic again, hopefully later this year if we have a final piece of legislation. So thank you again for joining us today and stay well.

Speaker 1: 24:19

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