Politics Should Not Hamper Retirement Security For Anyone - Forbes

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Creating pathways for more Americans to save for retirement and grow their own piece of the wealth pie has been an important issue for the last decade. While the debate around the future of Social Security continues, there has been an increased urgency to tackle retirement savings in new ways. At the federal and state level there has been some progress to give more Americans, including small business owners and their employees, additional pathways for retirement savings and increased transparency in how those funds are invested.

Currently, 56 million workers do not have workplace retirement benefits and research shows employees are 15 times more likely to save for retirement if they can do so through payroll deductions. More states are passing laws creating Individual Retirement Account (IRA) programs for businesses with more than five employees that automatically enroll employees who do not have access to employer-based retirement benefits. These state-facilitated programs also seem to be prompting more businesses to up their game in offering retirement benefits. For example, the share of small and mid-size businesses in Colorado that have at least five employees and offer a 401(k) grew from 25% in July 2022 to 38% in August 2023.

At the federal level, legislation included in the 2022 omnibus appropriations bill is also trying to make it easier for millions of Americans to invest in their retirements. The SECURE 2.0 Act requires companies that offer 401(k) plans to full-time employees to also offer this benefit to qualified hourly workers and increases the rate of catchup contributions for individuals who are 50 or older.

While this is progress on what should be a nonpartisan issue, politics has entered the fray.

In December, the Tennessee Attorney General filed a lawsuit against one of the state’s largest retirement funds based on the fund’s criteria for its investment portfolio. Nearly 600,000 Tennesseans are invested in this retirement fund and the lawsuit seems politically motivated instead of focused on the fiscal security of retirement for so many Tennesseans.

In addition to politically-motivated litigation, the regulatory environment is uncertain. In the final days of the 2023 Congressional session, some members of the House Education and Workforce Committee strenuously objected to a Department of Labor (DOL) proposed Retirement Security Rule. This rule was originally proposed by the Obama Administration, but faced legal challenges because of its overly broad language. This effort by the Biden Administration aims to narrow the objectives of the Obama Administration proposal. This sort of ping-pong politics isn’t helpful for investors, retirees, and the market.

The rule would close several loopholes created by the Employee Retirement Income Security Act of 1974, including ensuring that financial professionals advising investors on retirement savings should act solely in the best interests of their clients. Overall, the new rule has the support of many consumers and private sector groups.

Retirement security should not be political. Even small acts by policy makers to prohibit progress to retirement access or responsible investment create unnecessary barriers to long-term retirement savings. Encouraging retirement savings and responsible investing that increases those funds for future retirees doesn’t just make good business sense, it is good for the economy.

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Politics Should Not Hamper Retirement Security For Anyone - Forbes
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