Bipartisan legislation introduced in the U.S. Senate June 15 seeks to stem retirement plan leakage, backing auto-portability and a tax credit for adopting employers.
The Advancing Auto Portability Act of 2022, introduced by Sens. Tim Scott (R-SC) and Sherrod Brown (D-OH) has the potential to preserve up to $1.5 trillion in retirement savings over a 40-year period, according to the Retirement Clearing House (RCH), citing data from the Employee Benefit Research Institute. The legislation says that up to $105 billion in retirement savings leaves the defined contribution pension system annually because employees cash out their savings after a job change.
Under the Advancing Portability Act of 2022, employers that adopt the program will be eligible for a $500 tax credit to cover implementation costs. The legislation also contemplates:
- advance notice to eligible participants 30 days prior to the event, with the ability to opt out of the program; and
- notice to the individuals for whom the transaction is performed within 3 business days disclosing the nature of the transaction, fees, and contact information for the automatic portability provider.
With regard to the automatic portability provider:
- It must provide acknowledgement in writing that it is a fiduciary with respect to the individual on whose behalf the individual retirement plan is established.
- Its fees “shall not exceed reasonable compensation” and be approved in writing by the plan fiduciary.
- It “shall not market or sell data” relating to the individual retirement plan.
- It shall offer its services to on the same terms to any plan regardless of whether the provider provides other services to the plan.
- It will keep records for 6 years, conduct an annual audit to demonstrate compliance.
According to the RCH (which conceived the idea, brought it to reality, and has been active in promoting the concept on Capitol Hill and among regulators), auto-portability is “the routine, standardized and automated movement of an inactive participant’s retirement account from a former employer’s retirement plan to their active account in a new employer’s plan.” It is intended to serve the needs of participants who are subject to the mandatory distribution/force-out provision of their employer-sponsored plan (i.e., accounts with less than the current limit of $5,000), and is designed to work within the existing infrastructure and data flows of the qualified employer plan system.
According to a June 15 press release, nearly a third (31%) of workers who change jobs each year will cash out their 401(k) accounts within one year of moving to a new employer. However, the cash-out rate is higher among plan participants who are minorities (63% for blacks and 57% for Latinos), are between ages 20 and 29 (44%), or earn $20,000 to $30,000 a year (50%). Similarly, the percentage is higher for women (41%), especially women between ages 25 and 34 (71%).
Stay tuned.
"auto" - Google News
June 16, 2022 at 07:55PM
https://ift.tt/XD1AZYc
Bipartisan Bill Backs Auto-Portability - National Association of Plan Advisors
"auto" - Google News
https://ift.tt/iFE57Gb
https://ift.tt/KaJkY4z
Bagikan Berita Ini
0 Response to "Bipartisan Bill Backs Auto-Portability - National Association of Plan Advisors"
Post a Comment