Jodan Ledford, the CEO of Smart, a retirement technology business working on expanding the pooled employer plan (PEP) market in the United States, says he has recently been in conversation with members of Congress who are keenly interested in passing the Securing a Strong Retirement Act.
Like others in the retirement planning industry, Ledford has taken to referring to the ambitious retirement reform legislation as “the SECURE Act 2.0,” because the bill would build in various important ways on the success of the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed into law late last year. Among the follow-up legislation’s most popular features are a provision to increase the qualified plan required minimum distribution (RMD) age to 75, the elimination of barriers to allow greater use of lifetime income products, the expansion of retirement savings opportunities for nonprofit organization employees and the creation of greater clarity for startup tax credits that incentivize small businesses to join multiple employer plans (MEPs) and PEPs.
For context, Ledford’s background includes working on the development of the automated retirement plan system in the United Kingdom. He says members of the U.S. House and Senate who are focused on retirement reform are seeking out lessons from the private sector about how the United Kingdom implemented its mandatory retirement savings system, which includes features that resemble MEPs and PEPs.
“Smart has only been operating in the U.S. for about half a year, but, because we have extensive experience working in the U.K.’s retirement system, we have already spent a lot of time working with the key members of Congress who are focused on retirement reform,” he tells PLANADVISER. “They want to understand our experience in the United Kingdom with compulsory plan adoption. They have asked us about what kind of backlash occurred when plan participation was mandated, for example.”
Ledford says there was indeed some backlash, but it was in reality minimal and short-lived. Over time, he says, the positive outcomes already seen in the United Kingdom have shifted peoples’ mindsets about mandatory savings.
“The data shows that, on average, participants over there are saving upwards of 9% of their income for retirement,” Ledford says. “One of the lessons we have been stressing to Congress is that automation and easy-to-use technology interfaces have made it so much easier to get people saving. Another lesson is that the payroll deduction approach makes it much less painful for people to save, even for lower income workers.”
To be clear, Ledford says he does not expect Congress to pursue mandatory retirement savings legislation at this juncture, and, indeed, the Securing a Strong Retirement Act does not include any such mandate. Rather, it seeks to create various incentives to inspire U.S. businesses to adopt plans on their own volition. He says Congress is also likely to follow in the footsteps of the United Kingdom in allowing the private sector to continue to operate the retirement savings system, rather than attempting to create a government-operated system. However, Ledford says, should the Democrats take control of the Senate after the two Georgia runoff elections are settled in early January, the possibility of mandatory retirement savings could become more likely.
“I think the current lame duck session will allow Congress to engage in some important discussions and debate around SECURE 2.0,” he says. “Then, during the next Congress under President Joe Biden, there will be a real opportunity for refinements, and hopefully we will see passage of the bill early in the session.”
In terms of what President-elect Biden may seek to do unilaterally, Ledford says he expects there will be some effort to facilitate additional tax credits for lower income savers. He does not expect, as some news articles have implied, that Biden would seek to dismantle the existing tax incentives for higher-income workers already saving in 401(k) plans.