Secure 2.0's 'Saver's Match' could cover 22 million Americans

Sometimes it takes a while to see the impact of new legislation. More than a year after Secure 2.0 was passed, researchers have taken a look at one of its key provisions — and by their estimate, it will benefit millions of Americans.

That measure is the "Saver's Match," a matching contribution that the federal government will make directly to low-income workers' retirement plans, starting in 2027. For Americans earning less than $20,500 per year, the government will contribute 50 cents for every dollar they save in their accounts.

But how many people will actually qualify for this match? According to a new study by the Employee Benefit Research Institute (EBRI), the answer is almost 22 million Americans.

"It could be the difference between not being prepared for retirement and being prepared for retirement," said Craig Copeland, the study's author. "It's not going to be as much help for those near retirement, because they're only going to be able to get it for a couple of years. … But for those in their 20s and 30s, this is a really good opportunity to take advantage of extra money."

EBRI calculated that 83.8 million Americans fall under the income threshold set by the Saver's Match — but only 69 million earn that income as a wage, which is another requirement. Narrowing it down further, only 18.9 million of these workers have an employer-sponsored retirement plan; 1 million have traditional IRAs, and 2 million have Roth IRAs — bringing the total to 21.9 million workers.

The Saver's Match will replace the Saver's Credit, a tax credit that rewards retirement savings. In three years, instead of offsetting workers' taxes, the federal government will start putting dollars straight into their 401(k)s and IRAs. Copeland believes this will be much more effective.

"The credit had a really large deficiency," he said. "Many people that had the lowest incomes — by the time they got done with all the exemptions and deductions, they had virtually no tax liability. So it couldn't be used."

The Saver's Match, on the other hand, will take a more direct approach.

"Now anyone in the income thresholds who makes their contributions can get the money," Copeland said.

READ MORE: 5 ways 'SECURE 2.0' legislation could change retirement savings

Secure 2.0 is a sprawling retirement reform law that Congress passed at the end of 2022. The bipartisan legislation made 401(k)s more widely accessible, encouraged reforms like automatic enrollment and facilitated emergency savings, among many other measures.

The law was designed to head off what some see as a looming retirement crisis. Few Americans have the savings needed to maintain their standard of living after they leave the workforce, and according to the Federal Reserve, 28% of Americans have not saved for retirement at all.

The Saver's Match is one way to address that problem. For low-income workers, many of whom don't have an employer-sponsored plan like a 401(k), the match offers an important workaround: It's also available to IRAs.

"Even if they don't have access to an employer plan, this is one time that they could get a match using an IRA," Copeland said. "So that makes the incentive to get an IRA substantial — it's more than just the tax benefit. Now you can get extra money going into it, like you do with an employer plan."

But in order to take advantage of the Saver's Match, workers will need to know about it, and public awareness of such features is typically low. For example, 53% of Americans don't know the Saver's Credit exists, according to the Transamerica Center for Retirement Studies (TCRS) — and awareness is especially low among low-income workers.

"One of the challenges is that people who are more likely to be eligible for the Saver's Credit are even less likely to be aware of it," said Catherine Collinson, CEO of TCRS.

On the other hand, there's a key difference between the Saver's Match and the Saver's Credit, which is that the match is directly relevant to retirement plans. Copeland hopes that because of this, plan sponsors will make an effort to educate their workers about it.

READ MORE: 4 ways SECURE 2.0 will impact retirement in 2024

"I think this is something that employers can get behind and help inform their low-income workers that this is available to them, because it'll help them get assets in the plan," he said. "Whereas before, you were potentially offering them something that they didn't even qualify for."

Collinson is hopeful that tax specialists will help spread awareness as well.

"I have an expectation that there's going to be a lot of fanfare around it," she said. "Ideally, my vision is the Saver's Match will become a household name. A matching contribution from the federal government for eligible retirement savers? That's huge."

The important thing, Collinson said, is that these awareness campaigns begin as soon as possible. The Saver's Match will replace the Saver's Credit in 2027 — but that's not as far off as it may seem.

"It's the blink of an eye," Collinson said. "We need to be paving the way right now for this major transition."