A game plan to enhance retirement security for millions of Americans

America is a resilient nation. Americans are optimistic, innovative, forward-looking and compassionate. And when a crisis occurs, America’s best qualities shine through and burn brightly.

We are in the midst of an unprecedented health crisis that has caused a momentous disruption to our nation’s and the world’s economy as businesses have been ordered to shut down and individuals ordered to stay at home.

Recent data suggest signs of improvement and hope. And while this fight is not yet over, we are going to win.

Once this health-care battle is won and the stringent measures that have locked down our economy begin to loosen, we must turn our attention to the significant impact and financial consequences it has had on the millions of workers who have lost jobs or face new anxiety over employment insecurity.

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And while massive government relief has been injected to address present economic displacement, longer-term consequences that have affected and will affect workers’ futures must be addressed.

Recent financial polls show that the pandemic is causing Americans significant anxiety about their economic situation. Some findings conclude than nearly 66% of Americans are concerned about losing their savings or their retirement savings, while about 30% are concerned and thinking of postponing retirement.

Clearly, retirement security for millions of American workers is an issue that will need attention as we advance into recovery.

Our nation already was facing a retirement crisis where too few Americans are accumulating sufficient savings that will generate a monthly retirement income that will not be outlived. The loss of jobs and inability for millions of workers to contribute to retirement savings, compounded by the pandemic-related market volatility and a steep drop in account balances, may have a similar effect to what retirement savers saw in the 2009 recession.

This gut-punch to workers’ retirement savings will affect their ability to prepare for retirement. As Congress considers ideas in the coming weeks seeking to help America recover from the Covid-19 pandemic, the Insured Retirement Institute has proposed a five-point plan to help American retirement savers enhance their ability to save for retirement today and ways to strengthen their financial security for tomorrow.

By planning ahead for what Americans will need, we can ensure that Americans’ retirement security does not become another casualty of the pandemic.

This plan focuses on two core issues. First, it creates more opportunities for Americans to keep their tax-deferred retirement savings longer as a way to recoup some of the losses incurred as a result of stock market volatility during the Covid-19 crisis.

Second, the plan offers the means for employees who have been negatively impacted by the Covid-19 pandemic to enhance their ability to save more now for their retirement.

Congress should permit catch-up contributions, regardless of an individual’s age, to retirement accounts for those who lose a job due to Covid-19 related layoffs or health reasons.

Wayne Chopus

president and CEO of the Insured Retirement Institute

IRI’s five-point plan will help savers keep money longer. IRI recommends that Congress boost the age at which individuals are required to take minimum distributions from retirement accounts, such as 401(k) plans and individual retirement accounts, to 75.

Congress should also eliminate barriers to allow for the greater use of qualified longevity annuity contracts (QLAC), a vehicle that allows savers to protect part of their savings from market volatility while providing a source of guaranteed monthly lifetime income they cannot outlive.

This plan looks to improve the ability for workers to save more money for retirement now.

Congress should permit catch-up contributions, regardless of an individual’s age, to retirement accounts for those who lose a job due to Covid-19 related layoffs or health reasons. This would empower workers to save more than current annual maximums to make up for the lost savings opportunities due to job loss.

The Covid-19 pandemic has also hurt non-profits through decreased revenues and exacerbated the already challenging financial, legal and administrative environment for many of them to establish an employee retirement plan.

Congress should amend the Setting Every Community Up for Retirement Enhancement Act that passed in December 2019 — and which IRI supported — to permit non-profit employers the opportunity to band together in a multiple-employer plan (MEP) or pooled employer plan (PEP) the same way that other small businesses now can.

Finally, Congress should amend a provision in the SECURE Act that provides a tax credit to small businesses joining MEP or PEP to clarify that it applies from the time the small business joins a MEP or PEP. This will encourage more small-business owners to offer their workers access to retirement plans and enable workers to plan and save for their future as America’s small businesses recover from the crisis.

The Covid-19 pandemic is tragic. The human toll is painful and the economic anxiety it has created is a further burden on already strained resources and emotions. But there is no doubt that we will successfully navigate through this challenge and return our nation and the world to a healthy and prosperous direction.

— By Wayne Chopus, president and CEO of the Insured Retirement Institute

 

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