EARN Act Clears Senate Finance Committee

For the second time in a little more than a week, a key Senate committee has advanced an important piece of retirement plan reform legislation for a vote by the full chamber.

On Wednesday, the U.S. Senate Finance Committee unanimously approved, by a margin of 28 to 0, the Enhancing American Retirement Now Act, referred to as the EARN Act.

The legislation advanced through the finance committee one week after the Senate Committee on Health, Education, Labor and Pensions advanced a companion piece of legislation known as the RISE & SHINE Act, or the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act. Both of these moves come several months after the House of Representatives passed the Securing a Strong Retirement Act, an ambitious retirement reform package featuring many of the same provisions as RISE & SHINE and EARN.

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Presuming these related pieces of legislation follow the traditional process, passage of the EARN Act and the RISE & SHINE Act by the full Senate—which sources say is likely—would trigger a reconciliation process through which House and Senate leadership would craft a final bill or bills, to then be voted on by both chambers before being sent to President Joe Biden for signature.

In a statement about the legislative progress issued Wednesday, Wayne Chopus, IRI president and CEO, said there is now strong bipartisan momentum to address the anxiety and insecurity that many workers and retirees have about their ability to accumulate sufficient savings to provide them with sustainable income during their retirement years.

“IRI looks forward to working with the House and Senate to finalize a comprehensive bill that will put individuals on a path toward a secure and dignified retirement,” Chopus said. “We will advocate to expand the reach and impact of the final legislation to ensure there are more opportunities to offer protected lifetime income through workplace retirement plans.”

Kevin Barry, president of workplace investing at Fidelity Investments, also published a statement soon after the EARN Act’s committee passage.

“More than ever, employees are looking to their employers to help with all areas of financial wellness, including tackling student loan debt,” Barry wrote. “The EARN Act takes an important step to help those individuals by allowing employers to make ‘matching’ contributions to a 401(k) plan while their employees make student loan repayments. The EARN Act will also help facilitate automatic portability between retirement plans through so that individuals’ savings can follow them through job changes.”

According to Barry, the creation of pooled employer plans in late 2019 represented “an excellent step” toward addressing the retirement coverage gap by making it easier for small businesses to access retirement savings plans. The EARN Act builds upon that success, he wrote, and enhances PEPs and open multiple employer plans by allowing 403(b) plans to participate in such arrangements.

Ahead of the bill’s passage out of committee, the finance committee published a detailed summary of the EARN Act’s provisions here. Among its provisions are the modification of participation requirements for long-term, part-time workers; the treatment of student loan payments as elective deferrals for purposes of matching contributions to a retirement plan; a higher catch-up limit to apply at age 60; an increase in age for required beginning date for mandatory distributions; and many others.