According to the U.S. Chamber of Commerce, more than 600,000 people in Maryland quit their jobs in 2021 as part of the “great resignation.” As a result, local businesses have struggled to rehire workers as many are now looking for more flexibility, as well as better pay and benefits.
However, in this highly competitive job market, there may be a glimmer of hope in the form of the SECURE 2.0 Act making its way through Congress.
The law aims to expand automatic enrollment in retirement plans. For example, the SECURE 2.0 Act would require employers with 401(k) or 403(b) plans to automatically enroll all new, eligible employees at a 3 percent contribution rate. This rate would also increase annually by 1 percent until it reaches at least 10 percent.
In addition, the law would allow participants to direct employer matching contributions to be designated as Roth contributions, as well as provide similar treatment for all catch-up contributions. This means that employees can take advantage of the future tax benefits, which includes tax-free earnings on Roth 401(k) contributions and qualified tax-free withdrawals.
A unique feature that could help you land your next future star graduate is the opportunity for employers to elect to help start your retirement plan for you.
Traditionally, recent grads had to choose between saving for retirement and paying down student loans. Thanks to the SECURE 2.0 Act, they can do both at the same time; employers can elect to treat employees’ student loan payments as plan contributions for the purposes of providing the employee a matching contributions. This would not be mandatory, and would need to be adopted by employers.
With 58 percent of workers stating that preparing for retirement makes them feel stressed, according to the Employee Benefit Research Institute, the timing of this legislation is ideal. The good news is that Gen Z is better prepared for retirement than older generations, and the SECURE 2.0 Act could propel more savings for younger employees.
When it comes to attracting and retaining talent, the proposed retirement benefits of the SECURE 2.0 Act has the potential to be a key opportunity for HR leaders and plan sponsors.
Educating sponsors, employees
With the House and Senate expected to pass an agreed-upon version of legislation this year, now is the time for plan sponsors to educate themselves on what the new law could mean for their companies and begin thinking about what options they envision providing employees.
The most significant educational opportunity is with current and prospective employees. By letting them know about these new retirement benefits, it signals that the company is embracing new options that will positively impact employees’ financial futures.
Also, as employers have increased their investments in recruiting efforts, it’s important to consider communicating the benefits of this legislation to prospective employees. This can include showcasing the company’s employee-focused retirement benefits in job postings.
Retirement and accounting professionals can play a major role in educating plan sponsors and employees about these changes. In addition to helping to implement changes from the legislation, these professionals can also address any concerns – especially before it’s time to do employee benefit plan audits.
Despite fears of a looming recession, the job market is still doing very well. According to the U.S. Labor Department, the U.S. economy added 528,000 jobs in the month of July, and the unemployment rate went down to 3.5 percent.
Maryland companies need every opportunity to attract and retain talent. The SECURE 2.0 Act could be a strong addition to any employee benefit offering and has signs of improving American’s financial security.
Vicki M. Hitchcock is a senior manager, audit and accounting services at Gorfine, Schiller & Gardyn, a Maryland-based full-service certified public accounting firm.