SECURE Act expands access to retirement plans

SECURE Act expands access to retirement plans

  • The new SECURE Act makes it easier for smaller businesses to offer retirement plans
  • Annuity products may also become more common in 401(k) plans
  • The next step is for plans to put the law’s benefits into effect

Congress acted in late December to expand access to workplace retirement plans. Now it may be time for plan sponsors to review their plans.

The SECURE Act (Setting Every Community Up for Retirement Enhancement Act) of 2019 makes many changes to rules governing retirement accounts. Many features take effect right away.

The main goal of the law is to expand access to retirement accounts and encourage more workers to participate in plans available to them.

The SECURE Act takes many steps long sought by advocates of a more robust retirement savings system.

Considerations for plan sponsors

The SECURE Act takes many steps long sought by advocates of a more robust retirement savings system. Examples include:

  • The Act increases the auto-enrollment safe harbor cap on contributions. The cap on auto-escalation programs increases to 15% of income from 10%.
  • It expands access to lifetime income options.
  • It requires plans to offer projections of lifetime income. The illustrations will show participants how much lifetime income their plan balance is likely to deliver. Over the coming year, the Department of Labor will develop a model disclosure for plan sponsors to use.

Changes for smaller businesses

Despite its many advantages, 401k plans have presented hurdles to small companies due to costs and administrative complexity. The new legislation resolves many of these issues.


  • Creates “open” multiple employer plans. This provision makes it easier for employers with non-related businesses to establish a multiple-employer plan. In doing so, they can achieve some of the scale efficiencies of larger businesses.
  • Increases tax credit for smaller businesses starting a plan. Employers with 100 or fewer employees are eligible. The tax credit increases from a $500 maximum per year for the first three years to a maximum of $5,000.
  • Establishes a new tax credit for auto-enrollment retirement plans. One provision permits a $500 per year tax credit for up to three years for employers with 100 or fewer employees. The intent is to defray start-up costs for new plans that include automatic enrollment.

Time to talk to participants

Plan sponsors will likely want to share news about the law with plan participants in the coming year. Many of the provisions affect the rules around retirement savings accounts, a topic of interest to many savers. In addition to the lifetime income disclosure, the law reduces fiduciary exposure for sponsors who wish to offer guaranteed lifetime income options within a plan. As a result, participants may see more annuity offerings in the future.

Enacting this law was a major achievement, but the work does not stop there. Making the most of the law’s benefits takes effort by plan sponsors, supported by their consultants and advisors. Now is the time to chart a course of action.

For more details on the SECURE Act, read Putnam Wealth Management Center’s latest blog on the SECURE Act.


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