Senators Urge Labor Agency to Act on Key SECURE 2.0 Provisions

Senate leaders are urging the US Labor Department to prioritize several retirement plan access provisions Congress passed late last year, including initiatives to promote employee ownership, and pension-linked emergency savings.

The chair and ranking member of the Senate Committee on Health, Education, Labor and Pensions sent the department a letter this week outlining provisions in the new SECURE 2.0 Act (Pub. L. No. 117-328) they believe the DOL should “effectively and expeditiously implement.”

Sen. Bernie Sanders (I-Vt.), committee chair, and Bill Cassidy (R-La.), the ranking member, said full implementation of the sweeping retirement access law is “the ultimate goal,” but that the administration of certain provisions to help workers sign up for, better understand, and protect their retirement plans should come first.

WORK Act

The Worker Ownership, Readiness, and Knowledge Act was swept into SECURE 2.0 language last fall. It instructs the Labor Department to establish an Employee Ownership Initiative and authorizes $50 million in grant money to establish and expand employee ownership centers across the country.

The law requires the DOL to issue formal guidance to employee stock ownership plans on appropriate standards that will qualify under existing legal exemptions for valuing a company’s assets and transferring them to its workers. The department identified ESOP valuations as an enforcement priority in 2005 and has cracked down on plans ever since, repeatedly taking ESOPs to court over allegedly overpriced valuations.

Emergency Savings

SECURE 2.0 paves the way for employers to offer non-highly compensated workers emergency savings accounts capped at $2,500 that are attached to their 401(k) or pension plans.

The accounts are intended to give workers access to highly liquid cash reserves that protect long-term savings, avoiding high tax penalties and withdrawals that can dent future spending power. Regulators will need to issue clear guidance on the framework for the new accounts.

Plan Notices

Annual funding notices for defined-benefit pension plans must include additional information on plan assets, liabilities, and funding status under SECURE 2.0.

The provision is intended to give participants in traditional plans a clearer picture of the outlook on their joint savings and inform them of their right to higher benefits when a single-employer plan is funded beyond benefits guaranteed by the Pension Benefit Guaranty Corporation.

Defined-contribution plan notices for 401(k)s, 403(b)s, and similar plans may be consolidated into a single report. Both measures will require the Department of Labor to issue regulations.

Congressional Reports

Congress used SECURE 2.0 to instruct the Labor Department to study the effect of inflation on retirement savings and review its interpretive bulletin on pension risk transfers to determine whether amendments are warranted.

Both reports to Congress are due this year. The Labor Department discouraged its advisory arm from participating in the pension risk transfer study in May, citing time constraints.