Bipartisan legislation has been filed in both chambers of Congress that would raise caps on employer retirement plan matches and make it easier for small businesses to join multiple-employer plans.
Senator Susan Collins, R-Maine, chair of the Special Committee on Aging, and Senator Bill Nelson, D-Florida, reintroduced their Retirement Security Act of 2015. The bill would encourage businesses that are reluctant to sponsor individual plans to form MEPs by directing the Treasury department to issue regulations protecting members of MEPs should one of the participating employers fail to comply with plan requirements.
MEPs allow employers that share a common "nexus," such as a trade organization, to pool participants in one savings plan, creating cost and regulatory efficiencies otherwise not available to smaller, individual plan sponsors.
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Along those lines, the Senate Finance Committee this year is expected to take up the SAFE Retirement Act, proposed by Sen. Orrin Hatch, R-Utah. The legislation would expand the use of MEPs, allow public defined benefit plans to purchase private annuities, and create a "starter 401(k) plan" for small, private-sector employers.
The Collins-Nelson bill, meanwhile, would also raise the existing safe-harbor employer match limit of 6 percent to 10 percent, meaning employees could contribute up to 20 percent of their salary annually when combining the new match rate with the maximum 10 percent employee deferral.
"Making it easier for smaller businesses to provide access to retirement plans for their workers would make a significant difference in the financial security of many Americans," Collins said in a statement. The legislation would also encourage greater use of auto-enrollment and auto-escalation features.
Rep. Vern Buchanan, R-Florida, and Rep. Ron Kind, D-Wisconsin, introduced virtually identical legislation bearing the same name in the House.
In a statement on his website, Buchanan said he worked closely with Collins in drafting the House version in order to give the legislation the best possible chance of passing both chambers this congressional session.
Both bills give employers tax incentives to adopt new safe harbors that would increase their default match.
"By making it easier for small businesses to offer savings plans and offering incentives to employees who save more of their earnings, more workers can build up their retirement savings and more small businesses can attract and retain employees," Kind said in a statement.
The Insured Retirement Institute said it supports the legislation.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
