Senator Bill Cassidy (R-LA) speaks during a Senate Judiciary Committee judicial nominations hearing on Tuesday, April 18, 2023. Photo: Diego M. Radzinschi/ALM
Last June, Senator Bill Cassidy (R-LA), ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, issued a request for information (RFI) asking for ways to allow gig workers access to retirement benefits. As a result, he has issued a white paper this week titled Portable Benefits: Paving the Way Toward a Better Deal for Independent Workers, which outlines proposals to provide workplace benefits to independent workers.
"The vast majority of independent workers prefer alternative work arrangements to traditional employment but would like access to portable workplace benefits," said Sen. Cassidy, who is seeking for ways to remove federal legal and regulatory barriers for the 27 million gig workers, which includes truck drivers, construction workers and direct sellers. “Only 20% of independent workers participate in a defined contribution retirement plan due to lack of access,” said the Senator.
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“Traditional workplace retirement benefits are a key path toward financial security at the end of one’s career,” reads the report. “Yet only one in five independent workers participates in a defined contribution plan due to lack of access. This is the most significant barrier to savings for independent workers.”
Last July, the American Benefits Council responded to the Senator’s RFI, by sending a letter to the Senator that included suggestions introduced in the SECURE 2.0 legislation, as well as a 5-point plan that included pooled employers plans (PEPs) established by Congress.
The ABC requested that Congress direct the federal agencies to promote PEPs, since "the vast majority of workers and companies are not aware of how easy it is to set up PEPs …," said the letter.
In the Senator’s paper, he recommends PEPs as well as single employee pension (SEP) IRAs, which would increase independent worker access to and use of retirement accounts. Congress created PEPs in SECURE 2.0 to allow small businesses to band together under a single plan to lower overhead, drive down costs and alleviate administrative burdens. “SEP IRAs are similar to typical IRAs but with higher contribution limits and portability, making them another ideal potential option for independent workers,” writes Sen. Cassidy.
The paper also suggested that “companies and trade associations could set up PEPs and SEPs on behalf of independent workers, automatically enroll them without requiring contributions, and offer workers’ advice without creating an employment relationship and compromising their independent status,” writes Sen. Cassidy.
Related: Employer group urges Congress to increase retirement plan awareness for gig workers
“Congress could consider exempting SEP and PEP accountholders working more than 32 hours per week from requirements to remove money from their accounts by a certain age,” writes Sen. Cassidy. “This would align with 401(k) and 403(b) plans, giving workers the flexibility to ease into retirement and to continue saving later in life.”
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
