Bill would increase retirement security by making 401(k) rollovers easier
In June 2022, federal legislation was introduced to help employees save for retirement. The Advancing Auto-Portability Act of 2022 bill would allow a worker’s 401(k) savings account to be automatically rolled over from a previous employer to a new employer. The legislation would cut red tape to help Americans who change jobs frequently increase retirement savings.
According to the bill’s language, up to $105 billion of retirement savings leaves the defined contribution pension plan system annually because employees cash out their savings after a job change. This bill encourages employers in the private sector to reduce such cash-outs by developing automated solutions to improve defined contribution plan portability.
“The legislation is voluntary and offers modest economic incentives to employers who include it in their plan design. The legislation helps workers consolidate small accounts attributable to a prior employer’s individual account plan, improve overall asset allocation, eliminate unnecessary fees, and reduce leakage of retirement savings from the tax-deferred retirement saving system.” said Jim Klein, President, American Benefits Council.
Employees’ financial stress takes a toll at work
The amount of stress that employees have been under the past few years is spilling over at work. Many employees are struggling to make ends meet.
According to a recent Harris Poll survey called “The State of Employee Finances: 2022, A Purchasing Power Report,” 54 percent of full-time employees report they are having a hard time covering monthly expenses.
Some employers might think that their employees’ personal financial struggles are a separate matter from company business. Statistics in the report, however, show a different story.
According to the survey:
- 28 percent say it affects their ability to focus at work,
- 34 percent report it affects their physical health, and
- 25 percent claim it affects their job satisfaction.
Moreover, 72 percent of those surveyed think that employers share some of the responsibility for helping them improve their financial well-being.
How? Some options might include expanding voluntary benefits and having a broader approach to employees’ financial well-being. Based on the survey, 80 percent say their work benefits have a direct impact on them staying at their current job.
In the current uphill battle of recruiting and hiring workers, it’s clear that employers have a strong reason to be concerned about employees’ personal financial struggles.
Key to remember
Employees are looking to their employers now more than ever for financial wellness resources. Employers should be on the lookout for ways to assist.