Spending bill helps retirees, boosts financial sector – WSVN 7News | Miami News, Weather, Sports
WASHINGTON (AP) — Part of the $1.7 trillion spending bill passed Friday was billed as a dramatic step toward consolidating the retirement accounts of millions of working Americans. But the real windfall may land in a safer group: the financial services industry.
The retirement savings proposal labeled Secure 2.0 would reset the way people enroll in pension plans – forcing them to enroll in plans, forcing them to opt out. The layout is designed to ensure greater participation.
It also allows workers to use their student loan payments in lieu of their contributions to their retirement plans — meaning they can get matching pension contributions from their employers by paying off the loan. that — increases age-required distributions from plans and extends the tax-deductible savings credit.
But like so many high-profile spending bills that receive little public attention, the law’s provisions also benefit corporate interests with strong financial stakes in the outcome.
“Some of these provisions are good and we want to help people who want to save, but it’s a big help to the financial services industry,” said Monique Morrissey, an economist at the liberal Economic Policy Institute in Washington. Parts of the bill, he said, “are disguised as savings incentives.”
Daniel Halperin, a Harvard law professor who specializes in tax policy and retirement savings, said one of the most obvious benefits for the industry is the provision that gradually raises the age of mandatory distributions from 72 to 75 years old. as much as possible,” to collect administrative fees, he said. “For people who have saved $5-7-10 million, companies are still collecting fees. It’s crazy to allow them to leave it there.
Companies like BlackRock Funds Services Group, Prudential Financial, Pacific Life Insurance, and business lobby groups like the Business Roundtable and the American Council of Life Insurers are just some of the entities that have lobbied lawmakers on Secure 2.0 , according to Senate lobbying disclosures.
Katherine DeBerry, a representative for Prudential, said the company applauds the adoption of Secure 2.0, saying it will “help ensure that employees’ retirement savings last a lifetime.”
A representative for Blackrock declined to comment, and Pacific Life, the Business Roundtable and the American Council of Life Insurers did not respond to requests for comment from The Associated Press. Disclosure forms require only minimal information about the outcome the lobbyists are seeking.
Retired Sen. Rob Portman (R-Ohio) and Sen. Ben Cardin (D-Md.) introduced Secure 2.0 through a massive spending bill known as an omnibus. Nearly half of Secure 2.0’s 92 provisions stem, in whole or in part, from the Cardin-Portman legislation unanimously approved by the Senate Finance Committee this summer.
“Senator Cardin is proud of his role in crafting a balanced package supported by business, labor and consumer groups,” Cardin spokeswoman Sue Walitsky said in a statement. “It protects and encourages retirement savings for the most vulnerable, especially low-income people.”
Mollie Timmons, Portman spokeswoman, said the Secure 2.0 provisions “will help part-time workers and help smaller businesses provide retirement plans for their workers, where most low-income workers are employees”.
Both lawmakers’ campaigns have received significant contributions from companies linked to the retirement industry, according to OpenSecrets – Cardin receiving $329,271 from the securities and investment industry from 2017 to 2022 and Portman receiving $515,996 from both sectors at the same time.
Experts say the law contains good provisions for average Americans, such as creating emergency savings accounts for employers alongside retirement accounts. The new accounts allow workers to create tax-sheltered rainy day funds. The law also expands the Saver’s Credit, which provides a 50% tax credit on savings up to $2,000, which are deposited directly into a taxpayer’s IRA or retirement plan.
Morrissey and other pension experts also said the provisions serve as a reminder of the need to strengthen Social Security – the social program that benefits more than 70 million recipients – retirees, people with disabilities and children. The Social Security and Medicare trustees’ annual report released in June says the program’s trust fund won’t be able to pay full benefits starting in 2035.
For many Americans, Social Security — funded by payroll taxes collected from workers and their employers — is their only way to save for retirement.
In the sweeping spending package passed Friday, lawmakers authorized nearly half of the Biden administration’s proposed $1.4 billion spending increase for Social Security.
“Funding for the Social Security Administration has been steadily declining over the past decade, while the number of people it serves has grown,” said Nancy LeaMond, executive vice president of AARP. . “This has led to longer wait times, overcrowded field offices and disability claims processing times that have skyrocketed.
“There’s more to be done,” he said.
In a January Pew Research Center poll, 57% of American adults said that “taking steps to make the Social Security system financially sound” should be a top priority for the president and Congress. Securing Social Security won bipartisan support, with 56% of Democrats and 58% of Republicans calling it a top priority.
Nancy Altman, co-director of Social Security Works, an advocacy group, said Congress should adequately fund Social Security if “the goal is really to help middle-income families.”
However, the latest legislation is a small step to help the millions of Americans who are not saving for retirement.
US Census data shows that about half of Americans are saving for retirement. In 2020, 58% of working-age boomers have at least one type of retirement account, followed by 56% of Gen Xers, 49% of Millennials, and 7.7% of Gen Zers.
Olivia Mitchell, a Wharton economist who specializes in retirement savings, said the results of the move to Secure 2.0 could be felt mostly by workers at companies that match their employee contributions.
He said research suggests that automatic enrollment may initially increase pension plan coverage, but participation may decline over time.
Mitchell studied the first state-based plan, OregonSaves, self-enrolled workers whose companies did not have a retirement savings plan. He found that only 36% of workers had a positive balance after one year. Less than half of those enrolled in the scheme are still contributing after a year.
Still, he said, “the fact remains that low-wage workers who change jobs are often hard to reach through retirement savings plans.”
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