I’ve written about the SECURE Act before, and specifically my belief that it is an empty shirt policy and not worth the time and effort that it took to write and pass. It really doesn’t SECURE anything. Here is one example. The question and answer appeared in a WSJ article from this morning.
Q: The new law makes it easier for part-time workers to participate in 401(k) plans. Am I covered?
“Starting in 2024, 401(k) plans will be required to allow part-time employees who have worked more than 500 hours a year for at least three consecutive years to contribute, said Mark Iwry, who oversaw national retirement policy while at the Treasury Department during the Clinton and Obama administrations and is now a nonresident senior fellow at the Brookings Institution. Employers won’t have to provide matching contributions for these workers.” Industries that could be disproportionately affected include the retail, leisure, education and health-services sectors, which employ significant numbers of part-time workers.
Let’s say that I’m a part-time worker in the retail industry and I am “fortunate” to work 500 hours in each of the next 3 years at $10 / hour ($2.75 more than today’s minimum wage). I earn $5,000. Wow, aren’t I lucky!! Am I really going to put money into a 401(k), especially if my employer isn’t mandated to match a portion of my contribution? How is this helping those most in need of building a retirement nest egg? The industries mentioned above as being disproportionately affected are habitually low-wage industries. Just how are they being impacted, if they aren’t obligated to match anything?
There are many other pieces of this legislation that are more slight of hand tricks, especially as it pertains to the greater use of annuities, which can be very expensive options for participants. Just how much influence did our insurance industry have in getting this passed? Regrettably, the SECURE Act does nothing to address the looming defined benefit pension crisis. As Congress dawdles, the cost of doing nothing grows by $750,000,000 per month according to Cheiron. When are we going to see an honest effort to tackle the crisis?