The Rise & Shine Act takes “so many steps in this bill to bolster families’ retirement and emergency savings,” Murray said.
Along with a measure on emergency savings accounts, the bill also “makes it easier for employers to offer retirement plans” and “makes it easier to manage plans” as well as improves participation via auto-reenrollment, she said.
The bill allows employers to offer pension-linked emergency savings accounts, which they may automatically opt employees into at no more than 3% of salary. The accounts would be capped at $2,500 (or lower as set by the employer).
Contributions are made post-tax, and are treated as elective deferrals for purposes of retirement matching contributions. Once the cap is reached, the excess emergency savings contributions return to retirement plan savings.
Shai Akabas, director of economic policy at the Bipartisan Policy Center, said Tuesday in a statement that “allowing for automatic enrollment into emergency savings accounts” not only creates “a buffer against unexpected costs in the near term,” but also reduces “the likelihood that a person will make early withdraws from retirement savings for those emergency costs.”
In addition to helping companies set up traditional retirement plans, the bill also “makes it easier for people to establish new employee-owned businesses,” Murray said.
The bill also includes the INFORM Act, “which will ensure people get the information they need when forced to consider whether to take a lump-sum buyout and trade a lifelong pension for a one-time payout,” Murray said.
Wayne Chopus, president and CEO of the Insured Retirement Institute, said Tuesday that the bill’s passage out of committee “is a critical milestone toward addressing the anxiety and insecurity that many of America’s workers and retirees have about achieving a financially secure retirement.”