Washington’s pension reform advocates have had a chaotic 2021. Multiple efforts to help people save more effectively for retirement, including an informally called SECURE 2.0, seemed to be on the right track before other congressional efforts crowded them out.
But the effort could gain traction in 2022. In a recent webinar co-hosted by Yahoo Finance and the Bipartisan Policy Center, Representative Fred Keller (R-PA) said: SECURE 2.0 in the books is pretty positive.
Keller and other lawmakers have focused on one particular provision: linking retirement savings to student loan debt. The idea is to allow companies to contribute to employee retirement accounts when workers are making their student loan payments. In other words, if you invest $ 100 in your student loan, your business could “match” up to $ 100 in a retirement plan like a 401 (k).
The proposed law would help young people avoid missing years of valuable 401 (k) games. Today, many people carry retirement savings into their early years, although experts often note that those exact years of savings are the most valuable, given the power of compound interest.
Bankrate data suggests that college graduates with student loans often have to delay other priorities. Thirty-four percent report delaying emergency savings, 23% report delaying buying a home, and 29% delay saving for retirement.
The idea of allowing simultaneous loan payments and retirement savings has bounced around Washington for years, gaining support from Republicans as well as Democrats like Senator Ron Wyden of Oregon. For his part, Keller believes 2022 could be the time for the idea.
“There is a lot of support from employers because they understand the importance of making sure their workforce is safe,” says Keller.
Those who do not quite agree with the idea note that a third of workers in the private sector do not have access to a pension plan at work. Therefore, they argue, a new student loan and 401 (k) feature wouldn’t necessarily help many Americans, especially those in the lower end of the income spectrum.
“Why don’t we fix the tax code so that employers can actually pay people’s student loans directly rather than trying to do this backdoor system? Jennifer Brown, a researcher at UnidosUS, told Yahoo Finance in 2019.
But Keller calls it “a positive step” to help recent college students.
“This is, for me, something that I think everyone can support because it makes people save and the important part about it is that it is not something the government needs to find funding for. ‘money to invest as you would in forgiveness and so on, ”he said.
“Important reform for retirement savings”
Keller, who opposes the cancellation of the student loan, says SECURE 2.0’s proposed reforms are “a sustainable model” of how to help students who have a good chance of success.
“I look forward to doing everything possible to cross the finish line in 2022,” he said.
Other provisions of the legislation, known as the Securing a Strong Retirement Act of 2021, relate to raising the minimum age required for distribution when people need to start withdrawing money from their private pension plans as well as measures to encourage employers to automatically enroll new employees in pension plans. .
At the end of 2019, Congress passed “SECURE 1.0”, the first major retirement law in years; it included 401 (k) provisions to help part-time workers save money and improve access to annuities, among other changes.
In an interview with Yahoo Finance, Kevin Brady (R-TX), a member of House Ways and Means Ranking, listed other retirement reforms as one of his top priorities for 2022. Noting that SECURE 2.0 is benefiting from bipartisan support and would be “another important reform of retirement savings,” he hoped it could be done within the next 12 months.
For now, student debtors have a stay on their federal student loans. The U.S. government has suspended federal student loan repayments until Jan.31 in response to the pandemic, and President Joe Biden recently announced an extension until May 1.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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