The Secure Act 2.0 is coming, and financial advisors need to be ready if they want to give their clients the best retirement advice, according to Jackie Morales, chief operating officer at Security Benefit Corp., a financial services provider headquartered in Topeka, Kan.
Secure 2.0 is the follow-up legislation to the Secure Act, which made it easier for retirees to enroll in and benefit from employer-sponsored retirement plans. The new legislation will add even more flexibility for employers and employees to create and enroll in employer-sponsored retirement plans, in addition to adding other retirement benefits to the system.
The legislation has passed the House of Representatives with overwhelming bipartisan support. Several bills are now being reconciled in the Senate, and something could very well pass before the end of the year, according to Morales and Catherine Reilly, head of retirement solutions at Smart, a fintech company that supports companies implementing retirement plans.
Reilly cited AARP research saying that almost 57 million people, or 48% of American private sector employees ages 18 to 64, work for an employer that does not offer a traditional pension or retirement savings plan. Secure 2.0 is designed in part to increase that access and make it easier for employers to start retirement plans, she said.
Any legislation that increases the availability of automatic enrollment in retirement plans will mean more employees are encouraged to start saving for retirement, Reilly added. According to AARP, workers are 15 times more likely to save for retirement if they can do so through their job.
Morales added in an interview that Secure 2.0 can be used by advisors as a conversation starter, even before it passes, for clients who should be looking at their retirement options. One major change the act would make is it would increase the age at which required minimum distributions need to be taken from 401(k) plans. This would allow retirees more flexibility in their planning, Morales said.
The final bill may also make employer contributions count toward student loan payments, which could also affect retirement planning.
“Advisors need to be prepared to help clients implement changes, some of which will be phased in over several years, but some of which will take effect immediately,” Morales said. “Clients need to be poised to take that information and act on it.”
Security Benefit Corp. has been enhancing its digital capabilities, in part to be able to keep up with future changes in the law. “We all need to keep pace with these changes,” she said.
Reilly added that if Secure 2.0 does not pass in the Senate before the end of the year, the legislative process will need to start over in the next Congress, but any subsequent legislation will probably include most of the same proposals.
The good thing about retirement legislation is that it enjoys an exceptional level of bipartisan support, and the same people work on it from year to year, so Reilly said there should be a high degree of continuity in the policy proposals.