U.S. Senator Tim Kaine, D-Virginia, a member of the Senate Health, Education, Labor and Pensions Committee, and U.S. Representative Kathy Manning, D-North Carolina, have introduced the bicameral Auto Re-enroll Act of 2022.
The legislation seeks to increase workers’ participation in employer-sponsored retirement plans by encouraging retirement plans to automatically re-enroll workers, while giving employees the ability to opt out of the plans. Many employers automatically enroll their employees in retirement savings plans when they start a job, but employees may initially decide to opt out. The bill would prompt those who opt out of a retirement savings plan to reconsider their choice every three years as their careers progress and their financial situations change. This would lead to more workers benefiting from employer matches during their careers, the legislators explain.
Specifically, the Auto Re-enroll Act of 2022 would enhance automatic enrollment plans by amending safe harbors in the Employee Retirement Income Security Act and the Internal Revenue Code to encourage plan sponsors to re-enroll nonparticipants at least once every three years, unless the individual affirmatively opts out again.
A press release about the bill says only 51% of private-sector workers participate in employer-sponsored retirement plans. By not participating, they are leaving employer matching contributions on the table—not only saving less than they could, but also not receiving the full compensation they are entitled to.
“Nearly half of all private-sector workers are missing out on the benefits of their employer-sponsored retirement plan and employer matching contributions. The years that employees are working without earning these savings could have a large impact on their retirement,” Manning said in the release. “I introduced this bill with Senator Kaine to ensure that all Americans are getting their earned benefits while saving for their futures.”
Kaine and Manning also say many Americans who do not sign up for retirement plans when they start with their employer never reconsider that decision, even if their financial situation changes, contributing to an estimated 17.5 million Americans leaving free retirement funds on the table. By encouraging automatic re-enrollment, the legislation would help address that issue.
“Employer-sponsored retirement plans are an important part of retirement for millions of Americans,” Kaine says. “However, far too many workers are missing out on money that can go a long way toward financial stability in their retirement years by failing to participate in their employer matching contribution. This commonsense legislation will build on the success of auto-enrollment and help put families in Virginia and across the nation on a safer financial footing for the future.”
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