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Securing retirement: key things to know about the SECURE Act

Late December 2019, while many were winding down the year and enjoying holiday festivities, the federal government passed a new law aimed at improving retirement security for millions of Americans. The SECURE Act, short for Setting Every Community Up for Retirement Enhancement Act, is the first major piece of retirement legislation passed since the Pension Protection Act of 2006 (PPA).

Like the SECURE Act, the PPA was designed to improve retirement security. It transformed the way Americans save for retirement by allowing automatic enrollment features, raising contribution limits and permitting the use of retirement-focused default investments such as target date funds, to name a few. But there was still work to be done: Coverage gaps left pools of workers without access to a plan, strategies for converting savings into lifetime income were lacking, and increased lifespans meant that the age for required distributions became outdated. The SECURE Act addresses these issues and more, representing a significant step toward modernizing the American retirement system.

The SECURE Act comprises 30 provisions, falling into three broad categories:

While there is much to unpack within the new legislation, let’s dive into some of the provisions in each category that directly affect plan sponsors.

1. Increasing access to plans

Access to a plan through an employer has been shown to boost savings. According to AARP, workers are 15 times more likely to save if they have access to a retirement savings plan at their job. The SECURE Act encourages employers to implement retirement plans for their employees and broadens access to existing plans. Specifically, the SECURE Act:

2. Enhancing savings rates

PPA provided many provisions to help people save for retirement. Now, 13 years later, the SECURE Act modifies those rules to further improve savings rates. A few key examples include:

3. Increasing access to lifetime income

For years, the retirement conversation focused on the accumulation phase by urging workers to invest assets to build a nest egg. After retirement, people transition into the decumulation phase as they convert that nest egg into lifetime income. A holistic retirement plan should include retirement income, and the SECURE Act paves the way for that to happen by:

Action steps for plan sponsors to modernize their plans

The SECURE Act contains many significant changes that should improve retirement savings for millions of American workers and retirees. While many provisions are already in effect, further guidance is needed on others. In the meantime, plan sponsors should educate themselves about the SECURE Act provisions and assess their impact on their plans.

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Dimitrios N. Stathopoulos
Head of Americas Institutional Advisory Services
Source: AARP, “AARP Calls on Congress to Bolster Retirement Savings Rules,” 23 May 2019.
Source: U.S. Bureau of Labor Statistics. “Number of Jobs, Labor Market Experience, and Earnings Growth: Results From a National Longitudinal Survey.” August 2019.
Source: Gallup, ‘How Millennials Want to Work and Live,” 2016.

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