Congressman Richard Neal (D-Mass.) this month introduced legislation that appears designed to influence retirement plan design in a way that will expand auto-enrollment and auto-escalation. The bill is a second bite at the apple for Neal, who introduced similar legislation last year—amidst a nearly identically divided congressional priorities and politics. If the bill is approved, its provisions could help raise retirement savings figures that are more in line with the estimated income needs outlined by financial experts.
October Three has been following the legislation from the outset and offers a thorough description and analysis of Neal’s newest measure. Stripped down to the more salient details for 401(k) sponsors and participants, the bill would do 4 things:
The current safe harbor, exempting sponsors from nondiscrimination testing, requires employees to be auto-enrolled in the plan at a minimum 3% of pay, and auto-increased by at least 1% a year up to at least 6%, not exceeding 10%.
Neal’s bill would eliminate the 10% cap on escalations and change the escalation rate—3%, 4% and so on—to “at least” 3% (but not greater than 10%) and so on.
The bill also would add a new automatic contribution/automatic increase safe harbor that would use higher default rates—at least 6% in the first year (but not more than 10%), 8% in the second year and 10% in the third.
401(k) sponsors with a workforce that’s clocking more than 500 hours but less than 1,000 hours per year (for three consecutive years) would be required to allow such employees access to the plan. (This rule wouldn’t pertain to collectively bargained plans.)
The measure directs the IRS and the Social Security Advisory Board to prepare a “retirement handbook” and “retirement readiness checklist.”
The Employee Benefits Security Administration announced this week that the Department of Labor would implement a temporary enforcement policy that will allow 401(k) plans to reset the timing for the annual distribution of the investment comparative chart that they are required to furnish to plan participants. Most plans must furnish this year’s annual comparative chart no later than August 30.
“Under this policy, employers may reset their deadline for furnishing the comparative chart, but only once and only if the responsible plan fiduciary determines that doing so will benefit the plan’s participants and beneficiaries,” says DOL assistant secretary for EBSA Phyllis Borzi. “We are announcing this policy in response to requests from a number of employers who say it will be better for their workers if the comparative chart could be mailed out a little later in the year along with other disclosures. But, otherwise, all the protections in the rule stay in place.”
For sponsors that reset the disclosure deadline, no more than 18 months may pass before participants receive their next comparative chart.
Usually, the biggest criticism of workplace wellness is that the programs make employers out to play Big Brother. However, two authors this week wrote a blog post for AOL Jobs that frame wellness programs as employers attempting to “play doctor.”
Penned by Al Lewis and Vik Khanna, writers of the book “Cracking Health Care Costs” and the “Khanna on Health” blog, respectively, the blog post tells readers—likely average folks like your employees—to “ignore much of what these programs tell you, beyond giving up smoking, eating better, and exercising more.”
Lewis and Khanna rail specifically against health risk assessments and biometric screenings, writing that the commonly used wellness tools drive costs up not down, and are boons for overtreatment, overtesting, inaccurate diagnoses and other harms.
They advise employees to literally take the money and run, when it comes to wellness programs and the commonly attached incentives. “Fill out the form, roll up your sleeve, collect your money ... But stop there or you're statistically more likely to get harmed than helped.”
The comments section of the post is pretty bare—now’s your opportunity to tell the employer side of the story and offer tips for others on how to craft helpful, not harmful, programs.