Bill to assist small business offer retirement plans to employees
Bipartisan, bicameral legislation to reduce duplicative filing costs for small businesses looking to offer retirement plans to their employees was introduced today in the Senate and the House of Representatives.
The legislation was introduced in the Senate by U.S. Sens. Mark R. Warner (D-VA), a member of the Senate Finance Committee, and Susan Collins (R-ME), the Chairman of the Senate Aging Committee. In the House, the legislation was sponsored by Congresswoman Linda Sánchez (D-CA), a member of the House Committee on Ways and Means, and Congressman Phil Roe (R-TN), a member of the House Committee on Education and the Workforce.
“As the nature of work continues to change, increasing access to workplace retirement plans is a crucial step in providing a secure retirement to millions of Americans,” Sen. Warner said. “For smaller employers, offering a retirement plan can be expensive and complex, so we should make it easier and reduce duplicative filing costs for them to offer retirement plans and promote retirement security for all workers.”
“Americans simply aren’t saving enough to be able to afford a comfortable retirement. In fact, there is an estimated $7.7 trillion gap between what Americans have saved for retirement and what they will actually need,” said Senator Collins. “When employers provide their employees with access to retirement plans, approximately 80 percent of them contribute. Our legislation will help promote retirement security by making it easier and less expensive for small businesses to establish retirement plans, increasing their accessibility to employees and helping to ensure that those who worked hard for decades do not spend their retirement in poverty.”
The legislation was unanimously approved by the Senate Finance Committee in the 114th Congress.
“Too many Americans simply aren’t putting enough money away to be able to afford a secure retirement. By helping more small businesses provide workplace retirement plans we can give millions of hardworking families more financial peace of mind,” Congresswoman Sánchez said. “I’m proud to introduce this bipartisan and bicameral legislation to make it easier and less expensive for small businesses to establish retirement plans for their workers. This common sense legislation will help provide greater retirement security to more Americans.”
“With nearly 40 million working families who haven’t saved a dime for retirement, it is imperative we do all we can to help encourage affordable, accessible retirement savings,” said Congressman Roe. “By alleviating duplicative reporting requirements for plan administrators, we are making it easier for small businesses to provide secure retirement plans to their workers and reducing the costs for small business owners who provide retirement plans.”
A 2016 report by the Pew Charitable Trusts found that only 22 percent of workers at small firms have access to a workplace savings plan or pension, compared to 74 percent at firms with 500 or more employees. For smaller employers, offering a retirement plan can be expensive and complex.
The bill directs the Department of Labor (DOL) and the Treasury Department to allow employers and sole-proprietors participating in retirement plans administered in the same way to file a single aggregated Form 5500, a required annual return that provides important compliance information to DOL and Treasury.
Under current law, despite sharing a common administrative framework, each individual plan is still required to file a separate Form 5500 to satisfy reporting requirements under the Employee Retirement Income Security Act and the Internal Revenue Code. Today’s proposal will eliminate duplicative reporting by plan administrators, which will reduce costs for small businesses that maintain retirement plans. To file an aggregated Form 5500, the retirement plans would need to have the same trustee, fiduciary, plan administrator, plan year and investment menu.
The self-employed, including sole proprietors and small business owners, are the most likely to establish a retirement savings plan that would benefit from and meet the requirements necessary to file an aggregated Form 5500. According to 2016 survey findings from the Transamerica Center for Retirement Studies, in collaboration with Aegon Center for Longevity and Retirement, only one-third of self-employed respondents indicated that they make sure they are saving for retirement.
To provide DOL and Treasury time to implement this change, the proposal has an effective date of no later than January 1, 2021. A copy of the legislative text is available here.