House introduces new 401(k) bill to help workers under 21 start saving for retirement
Following a companion bill introduced in the Senate last year, the House has introduced legislation that removes barriers for employers to begin offering employer-sponsored retirement plans to employees aged 18 to 21.
Young working Americans are getting closer to starting their retirement savings journey a bit earlier. A bipartisan bill introduced in the House of Representatives would open the 401(k) retirement savings window to include employees between ages 18 and 21.
The Helping Young Americans Save for Retirement Act, introduced in the House on August 2, is aimed at expanding access to employer-sponsored retirement plans for young workers. This bill follows companion legislation filed in the Senate last November by Sens. Bill Cassidy (R-LA) and Tim Kaine (D-VA).
The new House legislation was filed jointly by Congresswoman Brittany Pettersen (D-CO) and Congressman Tim Walberg (R-MI). “I got my first job at an early age and worked through middle school, high school and college. We have to make sure our financial regulations keep up with reality and give all employees an opportunity to build a stronger financial foundation from the start,” said Rep. Pettersen in a statement.
“Empowering young Americans to start saving early not only fosters financial independence but also strengthens retirement security,” said Rep. Walberg.
Currently, employers are only required to make 401(k) plans available to employees who are 21 or older. Employers can open retirement plans to those younger, but many do not do so “due to high costs and excessive red tape,” said Rep. Pettersen.
The new bill would lower the participation age of Employee Retirement Income Security Act-covered defined contribution plans to those 18 years old and remove provisions that make it expensive to include younger workers in defined contribution plans. Specifically, the bill delays ERISA provisions that require businesses to undergo mandatory audits if they allow employees younger than 21 to start contributing to their plan and exempts 18 to 20-year-old employees from testing related to retirement funds that would increase the cost of administering retirement plans for these employees.
Rep. Pettersen cited a Plan Sponsor Council of America report that shows that about 40% of 401(k) plans have a minimum age requirement of 21. However, when PSCA asked employers whether they would support mandatory plan eligibility at age 18, a large number of employers were in favor of helping employees save sooner.
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The Helping Young Americans Save for Retirement Act is supported by the American Benefits Council: “This bill takes a very important step forward in recognizing that beginning retirement savings at an early age can make a significant difference. First, saving early means that the money has more years to grow before retirement, so that even a small amount set aside at age 18 can grow into a very important part of a retirement nest egg. Second, helping younger employees get into the habit of saving can help establish a culture of saving that will serve those employees well throughout their lifetimes.”