1. Automatic enrollment and reenrollment retirement plans
While traditional retirement plans require individuals to actively enroll and make savings decisions, other retirement plans automatically enroll employees unless they choose to opt out. These automatic plans have emerged as a compelling strategy to enhance participation and savings rates, leveraging the power of inertia and behavioral biases to encourage participation and promote savings.
The Consolidated Appropriations Act of 2023 (HR 2617) was signed into law in December 2022, and includes important provisions affecting retirement savings plans, which are intended to build upon the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act.7 These provisions, collectively referred to as SECURE 2.0, offer many new benefits designed to improve employee retirement outcomes by making it more attractive for employers to offer retirement plans. Relevant elements include requiring plans established after December 29, 2022, to automatically enroll new employees, and to escalate their contributions annually up to 10% to 15%. Positive outcomes for employees would likely be enhanced, however, if the legislation were made effective to plans established before December 29, 2022, effectively bringing pre-existing plans into the auto-enrollment and escalation regime.