Senators introduce legislation to expand access to retirement plans

A pair of senators introduced bipartisan legislation Tuesday to expand retirement planning and retirement savings by offering more tax incentives to individuals and small businesses.

Sen. Rob Portman, R-Ohio, and Ben Cardin, D-Md., introduced the Retirement Security & Savings Act, a set of reforms for strengthening retirement security by allowing people who have saved too little to set more aside for their retirement; helping small businesses offer 401(k)s and other retirement plans; expanding access to retirement savings plans for low-income Americans without coverage; and providing more certainty and flexibility during Americans’ retirement years.

The bill includes more than 50 provisions. It would establish a new incentive for employers to offer a more generous automatic enrollment plan and receive a safe harbor from costly retirement plan rules. It includes a tax credit for employers that offer these safe harbor plans starting at 6 percent of pay in addition to the existing safe harbor of 3 percent to give employers the ability to offer more generous retirement benefits to their employees. The bill also increases the “catch-up” contribution limits from $6,000 to $10,000 for baby boomers (individuals over age 60) with 401(k) plans. It would allow employers to make a matching contribution to the employee’s retirement account in the amount of their student loan payment. It also would allow employers to make an additional contribution on behalf of employees in a small business SIMPLE retirement plan. The bill would also index to inflation the allowable catch-up contribution to individual retirement accounts.

Sen. Rob Portman, R-Ohio
Senator Rob Portman, a Republican from Ohio, speaks during a Senate Homeland Security committee hearing on Capitol Hill in Washington, D.C., U.S., on Tuesday, April 9, 2019. Secret Service Director Randolph Alles announced he would step down a day after Trump asked Homeland Security Secretary Kirstjen Nielsen to resign out of frustration over a spike in illegal crossings of the U.S. border with Mexico. Photographer: Al Drago/Bloomberg

For small businesses, the bill would increase the current tax credit for small businesses starting a new retirement plan from $500 to as much as $5,000. It would provide a small business tax credit for adopting the more generous safe harbor from costly rules. It would also simplify rules for small businesses, including allowing small businesses to self-correct all inadvertent plan violations under the IRS’ Employee Plans Compliance Resolution System without paying IRS fees or needing formal submissions to the IRS. The bill also aims to simplify “top-heavy” rules for small business plans to reduce the cost of enrolling new employees. It also sets up a new three-year, $500 per-year tax credit for small businesses that automatically re-enroll plan participants into the employer plan at least once every three years.

“This bill is an important new chapter in my bipartisan work with Senator Cardin to strengthen the private sector retirement system,” Portman said in a statement Tuesday. “Since our last comprehensive package became law in 2001, we’ve seen more Americans participate in 401(k)s and IRAs to save for their retirement but our savings rate still remains too low and there are far too many Americans with no retirement account at all. This legislation includes sweeping reforms to help Americans save more for retirement by allowing people who have saved too little to set more aside for their retirement, helping small businesses offer 401(k)s and other retirement plans, expanding access to retirement savings plans for low-income Americans without coverage, and providing more certainty and flexibility during Americans’ retirement years.”

The bill also aims to expand access to retirement savings plans for low-income americans without coverage. It would expand the existing Saver’s Credit income thresholds to give more Americans access to increased credit amounts.. The legislation would also create a new “government match” for low-income savers by making the Saver’s Credit directly refundable into a retirement account. In addition, it would expand the eligibility of 401(k)s to include part-time workers that complete between 500 and 1,000 hours of service for two consecutive years.

“Ensuring that families and workers can retire with dignity and stability is an ongoing, and strongly bipartisan, effort,” said Cardin in a statement. “There have been many recent efforts acknowledging this need, yet more work needs to be done to make sure families have the necessary tools to be successful in their retirement.”

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