What is the SECURE Act? And How Will It Change (or Help Start) Your Company’s Retirement Plan?
According to the U.S. Bureau of Labor Statistics, only 55% of adults participate in a workplace retirement plan. And even those who do participate are often not investing nearly enough each month to ensure a comfortable retirement—as revealed in a separate survey, which showed the median 401(k) balance for those ages 65 or older at just $58,035.
What this means is that all currently working generations of adults are woefully financially unprepared for retirement. But thanks to new legislation and tangible government action, things are beginning to turnaround enabling Americans to avoid sinking further into a national retirement crisis.
On December 20, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was finally signed into law. The Secure Act initially passed in the House of Representatives back in May 2019, but languished in the Senate for months before it was attached at the last minute to the bi-partisan appropriations package.
Designed to help employers better start and administer retirement plans, the encompassing reform package better reflects updated retirement demographics, broadens employee access to retirement plans, and makes it easier for businesses to start and offer plans to employees. The SECURE Act aims to encourage employers who have previously shied away from offering retirement plans, which can be expensive and difficult to administer, to start offering them.
Here are a few key SECURE Act takeaways for both businesses and individuals:
While this patchwork of long-needed legislation is by no means a fix-all for the nation’s current retirement challenges, but it is certainly a step in the right direction. The SECURE Act makes more options available and offers greater flexibility to more people, but workers still need to save more for retirement and businesses need to do more to help their employees accomplish this. In time, these changes (along with hopefully more improvements in the future) could significantly alter how employers provide retirement plans for the better.
HR professionals and plan sponsors need to be aware of and study the SECURE Act’s numerous changes to the retirement and compliance landscape, as many of the effective dates were effective immediately or at year-end. Thankfully, SHRM has provided a comprehensive list of effective dates varied by the provision.
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