DEC. 10, 2020
Nationwide has a long history of advocating for improvements to the country’s retirement security system. Many opportunities exist to improve our current system that can make the journey to financial wellness less difficult for savers.
In recent years, the work of the U.S. Senate Finance Committee to improve our retirement system has delivered real benefits to American workers, including the SECURE Act of 2019. The provisions of the SECURE Act have had a significant impact on our industry, and Nationwide is using the opportunity created around retirement income as one of the reasons to build our In-Plan Annuity suite. Legislation like the SECURE Act have an enormous opportunity to change the landscape of the industry and create more opportunities for employers and employees to live in and save for retirement.
This week, I had the opportunity to testify in front of this Senate committee in support of the latest retirement reform bill, the Retirement Security and Savings Act (S. 1431). The new bill, known colloquially as the “SECURE Act 2.0,” includes several key provisions that are critical for supporting workers on their financial wellness journey.
The financial wellness journey
At Nationwide, we think about this journey in three phases: meeting current financial needs, saving for retirement, and living in retirement. Planning for retirement requires workers not only to have opportunities to save but also the financial means to fund those savings opportunities. However, we know the challenges college grads face from student loan debt and the opportunity for businesses to alleviate some of that pressure by matching qualified loan repayment with retirement plan contributions could ease that burden.
In recent years, we have seen employers take a greater interest in helping workers improve their overall financial wellness. The SECURE Act 2.0 would allow employers to make greater strides in that direction by permitting matching contributions to 401(k) or similar retirement plan accounts based on a participant’s student loan payments. We believe this provision, if included in the final legislation, would become a popular benefit, helping employers respond to employees’ concerns over student loan debt and helping workers achieve better retirement savings outcomes.
To help workers save for retirement, provisions in the SECURE Act 2.0 to increase “catch-up” contributions for workers over 50 would be particularly beneficial. While immediate financial concerns are a significant cause of worry for all workers, retirement income becomes a primary concern for individuals after they reach age 50. Higher contribution limits for older workers could play an important role in helping them close the savings gap as they near retirement.
Additionally, we see an incredible opportunity to level the playing field for the retirement investment options available to participants in 403(b) plans, including workers in healthcare, non-profit and education. One provision in SECURE Act 2.0 expands the availability of collective investment trusts (CITs) in 403(b) plans similar to what is available in 401(k) and 457 plans as a cost-effective investment strategy.
For the third stage of the financial wellness journey, living in retirement, proposed changes in the SECURE Act 2.0 legislation would provide workers with appropriate products to help them make their savings last, especially as life expectancy increases. Raising the age for starting required minimum distributions (RMDs) to 75 would allow workers to save more effectively and plan withdrawals on a schedule that works for each individual saver. Moreover, enhancements to lifetime income products or qualifying longevity annuity contracts (QLACs) would help retirement plan participants protect against the risk of outliving their savings with a low-cost solution.
Nationwide is a committed advocate for financial wellness
At Nationwide, we are committed to the retirement plans marketplace and in making continuous investments in our business to allow us to do the right thing at the right time to drive better participant experiences and be a better partner to financial professionals, consultants and plan sponsors. We demonstrate this commitment by helping Americans realize greater financial wellness and advocating for regulatory enhancements that allow workers to achieve secure retirement outcomes through the benefits offered by their employer.
We’ve prepared a SECURE Act 2.0 overview that includes the provisions proposed in the latest version of Senate bill 1431. This overview would be helpful for retirement plan advisors, consultants and plan sponsors alike. As always, please contact a Nationwide Retirement Plans representative if you need more information about recent regulatory developments and how our solutions are designed to change with the industry.