Legislation that builds off the House-passed SECURE Act 2.0 bill and includes provisions advanced by the American Retirement Association has taken an important step in the Senate.
The Senate Health, Education, Labor and Pensions (HELP) Committee approved the legislation—formally named the “Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg” (RISE & SHINE) Act (S. 4353), by a unanimous voice vote June 14.
The bill is now cleared for consideration by the full Senate, where it is expected to be merged with forthcoming legislation by the Senate Finance Committee. Once the Senate approves its counterpart to the House’s SECURE 2.0 bill—which is anticipated later this summer or early fall—the House and Senate bills will be merged into a final bill, which is not expected to pass until later this year, likely in a lame-duck session after the November elections.
Sen. Patty Murray (D-WA), chair of the Senate HELP Committee, and Sen. Richard Burr (R-NC), the committee’s ranking Republican, introduced their bill on June 7 after previously releasing a discussion draft. The package is intended to build off SECURE 2.0, which the House of Representatives passed in March, as well as the Retirement Improvement and Savings Enhancement (RISE) Act introduced in the House and the Retirement Security & Savings Act introduced by Sens. Ben Cardin (D-MD) and Rob Portman (R-OH).
RISE & SHINE vs. SECURE 2.0
While the RISE & SHINE Act shares some similarities with SECURE 2.0, it also diverges in certain ways. For instance, probably the biggest difference is that the RISE & SHINE Act does not include the mandatory auto-enrollment provision for business with more than 10 employees included in SECURE 2.0, but instead looks to include an automatic reenrollment provision for every three years. RISE & SHINE also includes an emergency savings component of up to $2,500 that would be linked to DC plans, while SECURE 2.0 does not include such a provision.
Similar provisions in the both bills include:
- allowing 403(b) plans to participate in multiple employer plans (MEPs) and pooled employer plans (PEPs) (the ARA advocated for this provision);
- reducing the requirement for part-time workers to participate in an employers’ retirement savings plan from three years of service to two years;
- eliminating unnecessary plan requirements related to unenrolled participants; and
- directing the DOL to modify its regulations concerning performance benchmarks for asset allocation funds.
Provisions in RISE & SHINE that are not in SECURE 2.0 include:
- allowing some incidental plan design expenses to be paid from plan assets (the ARA advocated for this provision);
- making various PEP clarifications, including that a named fiduciary is responsible for collecting contributions in a PEP;
- clarifying that plans filing Form 5500 under a Group of Plans need only to submit an audit opinion if they have 100 participants or more;
- raising the limit on mandatory distributions from $5,000 to $7,000;
- clarifying that, for purposes of cash balance plans, the interest crediting rate that is treated as in effect and as the projected interest crediting rate is a reasonable projection of such variable interest rate, subject to a maximum of 6% (this clarification will allow plan sponsors to provide larger pay credits for older, longer service workers); and
- directing the Treasury and Labor departments to amend regulations to permit DC plan sponsors to consolidate certain required participant notices (the ARA advocated for this provision; SECURE 2.0 includes a provision directing the agencies to study the issue and report back to Congress.)
Provisions in SECURE 2.0 that are not in RISE & SHINE include:
- enhancing the credit for small employer retirement plan startup costs;
- enhancing the Saver’s Credit by simplifying the credit rate;
- increasing the catch-up contribution limit for those ages 62–64;
- treating student loan payments as elective deferrals for purposes of matching contributions;
- increasing the age for required beginning date for mandatory distributions;
- requiring at least one quarterly benefit statement to be delivered on paper per year, unless the participant opts out of the paper requirement;
- removing required minimum distribution barriers for life annuities; and
- implementing a retirement savings lost and found database.
During the Senate HELP Committee’s markup of the legislation, the committee approved two amendments by voice vote and rejected another along party lines:
- QDROs: The committee approved an amendment offered by Sen. Tina Smith (D-MN) and cosponsored by Sen. Lisa Murkowski (R-AK) that seeks to recognize the sovereignty of tribal courts by allowing them to issue a qualified domestic relations order (QDRO), such that there is parity between tribal and state courts.
- Inflation: The committee alo approved an amendment offered by Sen. Roger Marshall (R-KS) directing the Department of Labor to study the impact of inflation on retirement savings.
- ESG Rejection: Sen. Mike Braun (R-IN) offered an amendment to specify that retirement plan fiduciaries cannot use non-pecuniary factors when considering plan investments and are to act only in the financial interests of plan participants. In essence, the amendment sought to preempt the Department of Labor’s proposed regulation that would allow plan fiduciaries to consider, for example, climate change and other environmental, social and governance (ESG) factors when they select investments and exercise shareholder rights. The amendment was rejected by the committee along party lines by a tie vote of 11-11 .
Members also raised two issues that they would like to see prioritized as the legislation works its way through Congress:
- Financial Freedom Act: Sen. Tommy Tuberville (R-AL) discussed his Financial Freedom Act (S. 4147) introduced May 5 to prohibit the DOL from issuing guidance that limits the type of investments that self-directed 401(k) account investors can choose through a brokerage window. The original target of Tuberville’s legislation was the DOL’s guidance cautioning plan fiduciaries from including cryptocurrencies in their investment lineups, but he noted that the legislation goes beyond crypto, such that it allows retirement savers to have full control over how they invest their 401(k)s. Tuberville did not call for a vote on his bill, but Committee Chair Murray noted that she would work with him to find a bipartisan solution.
- Volunteer Firefighters: Similarly, ranking Republican Sen. Richard Burr (R-NC) raised the issue of allowing volunteer firefighters and emergency medical service workers to join the governmental retirement plan of the locality or state where they work, which they currently are unable to do. In pushing for the change, Burr noted that he will not support a final year-end retirement package if it does not include this fix, to which Murray responded that she will continue working with him to reach an acceptable resolution.