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Compliance February 3, 2025
Is SECURE 3.0 on the Horizon?
The industry contemplates the future of policy evolution.
Reported by Mallika Mitra
Art by Davide Comai
More than two years ago, SECURE [Setting Every Community Up for Retirement Enhancement] 2.0 transformed retirement savings by offering Americans more ways to save for their future. The legislation provided additional opportunities for savers to make catch-up and after-tax contributions, increased the age for required minimum distributions, made automatic enrollment a must-have, and much more. But there is still work to do.
For instance, just 58% of workers at private firms with fewer than 100 on staff had access to retirement benefits as of March 2024—and only 40% participated—according to the Bureau of Labor Statistics.
As advisers, plan sponsors and recordkeepers contend with the many mandatory and optional provisions in SECURE 2.0 over the next few years, legislators and policymakers are already contemplating what may be next.
Observant policy watchers and lobbyists see traction for a so-called SECURE 3.0. They shared what they see as possible in policymaking for retirement, and where they anticipate challenges.
Building on Past Legislation
One major projection for SECURE 3.0 is that it will build on existing themes of SECURE 2.0 and the original SECURE Act, which was passed in 2019 and became law in 2020, says Bonnie Treichel, founder and chief solutions officer at Endeavor Retirement. The next phase of legislation will likely include continued expansion of coverage and a push to expand automatic enrollment, beyond new plans, as established in SECURE 2.0. She points to the Helping Young Americans Save for Retirement Act introduced last year that would lower the eligibility age from 21 to 18 and suggests that concepts such as this one would likely come together in a SECURE 3.0.
SECURE 3.0 would also likely clarify some of the provisions introduced in SECURE 2.0, just as 2.0 was used to clarify some of SECURE 1.0, says Chuck Williams, managing officer and chief executive officer at Finspire. For example, SECURE 2.0 allows employers to match employees’ qualified student loan payments, and new legislation could provide more information on how the matches are calculated.
“There’s a little bit of confusion [about] that,” Williams says. He says he expects we may also see clarification concerning the Retirement Savings Lost and Found, a database to help participants and their beneficiaries find unclaimed benefits that the Department of Labor created as required by the SECURE 2.0 act.
Where There’s Bipartisan Support
SECURE 3.0 may also continue to deal with collective investment trust access in 403(b) plans if this isn’t already solved elsewhere, Treichel says. “This issue alone likely won’t be a priority for Congress, but, if not otherwise attached to something earlier, then it will likely be included with a SECURE 3.0.”
There seems to be bipartisan support for allowing not-for-profits to have access to lower-cost CITs, which they are currently disallowed inside their 403(b) plans, Williams adds. Another theme that has support from both sides of the aisle is to make retirement savings easier for participants to understand, as outlined in the Retirement Simplification and Clarity Act, which was introduced in December. One particular concern is participants failing to understand their options when they leave a company, leading to many cashing out their retirement plan accounts instead of rolling them over to their new employer, an individual retirement account or leaving them as is, Williams says.
More Opportunities to Expand Coverage and Access
State mandates, along with continuous outreach and education on startup tax credits for small businesses, can significantly expand access to retirement plans, says Michael Conrath, chief retirement strategist at J.P. Morgan Asset Management.
“By exploring enhanced platform solutions that simplify administration, reduce fiduciary liability and streamline plan establishment, these offerings are poised to further drive the growth of plan creation,” he says.
Meanwhile, a significant opportunity for plan sponsors to enhance their benefits is by offering an in-plan retirement income solution, Conrath says, adding that generating income to cover retirement expenses is often more complex than simply saving for retirement. For instance, J.P. Morgan Asset Management’s 2024 plan participant research found that 77% of workers are concerned about creating a steady income stream throughout their lives, and 90% said they would be interested in an option on their plan’s menu that would provide guaranteed income in retirement.
“Solutions that integrate lifetime income within a target-date fund, offering flexibility, transparency and control, can effectively help improve retirement outcomes for participants,” Conrath says.
The Automatic IRA Act of 2024 may be reviewed as well to see whether it makes sense to have a federal rule requiring employers that don’t offer a retirement plan to automatically enroll their employees in IRAs or other automatic contribution plans or arrangements, such as a 401(k) plan, since some states have their own version, Williams says. Another area with both proponents and adversaries is the use of private investments in 401(k)s, and while there will likely continue to be discussions about the possibility, Williams says he isn’t sure any policy regarding the topic will actually be included in the next round of legislation.
Challenges for SECURE 3.0
The damper on the benefits of SECURE 3.0 will be the cost of implementing the legislation, Treichel says. One major issue facing Congress this year is the expiration of the Tax Cuts and Jobs Act, which will require considerable discussion about how a SECURE 3.0 is paid for and in turn may put back on the table concepts such as Rothification.
Plus, there’s still much on the industry’s plate when it comes to legislation that’s already in place. “While there are rumors of SECURE 3.0 that are mounting and which I believe ultimately be proposed, there is still a lot to be done with SECURE 2.0,” Treichel says.
