Senate bill would facilitate retirement plans for small business employees

congressU.S. Sens. Mark Warner (D-VA) and Susan Collins (R-ME) reintroduced legislation to reduce duplicative filing costs for small businesses seeking to make retirement plans available to their employees.

The bill was sponsored in the House by Reps. Linda Sánchez (D-CA), member of the House Committee on Ways and Means, and Phil Roe (R-TN), member of the House Committee on Education and Labor.

“Employer-provided retirement plans give workers stability and strengthen our economy in the long run, but the process of offering these plans can be expensive and complex for smaller employers,” said Sen. Warner. “This bill would remove an unnecessary impediment and reduce filing costs, thereby making it easier for employers to promote the retirement security that workers deserve.”

“Faced with an alarming $7.8 trillion shortfall in personal retirement savings, Americans simply aren’t saving enough to be able to afford a comfortable retirement,” said Sen. Collins. “When employers provide their employees with access to retirement plans, approximately 80 percent of them contribute.  This bipartisan bill 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.”

“Too many Americans simply aren’t putting enough money away to be able to afford a secure retirement. It is no secret that women, especially women of color, are even farther behind in building adequate retirement savings due to continued pay inequality. By helping more small businesses provide workplace retirement plans we can give millions of hardworking families more financial peace of mind,” said Rep. Sánchez. “I’m proud to introduce this bipartisan, 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.”

“It is imperative we do everything we can to encourage affordable and accessible retirement savings for all Americans,” said Rep. Roe. “This commonsense legislation will make it easier and less costly for small businesses to provide retirement plans for their workers by alleviating duplicative reporting requirements for plan administrators. I am proud to support this bill, which will promote a secure retirement for hardworking Americans.”

A 2016 report by the Pew Charitable Trusts showed that only 22 percent of workers at small companies have access to a workplace savings plan or pension, compared to 74 of workers at firms with 500 or more employees.

This legislation would allow employers and sole proprietors who participate in retirement plans to file a single aggregated Form 5500 – a required annual return that that provides compliance information to the Department of Labor (DOL) and the Treasury Department. Currently, employers are required to file separate forms to satisfy reporting requirements under the Employee Retirement Income Security Act and the Internal Revenue Code. By eliminating the need to report these two forms separately, this bill will remove unnecessary red tape and reduce costs for small businesses who wish to provide workers with retirement security. Under this bill, retirement plans would need to have the same trustee, fiduciary, plan administrator, plan year and investment menu in order to be eligible to file an aggregated Form 5500.

According to a 2016 survey conducted by 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. These self-employed workers, along with sole proprietors and small business owners, are the most likely to benefit from this legislation, as they are the most likely to establish retirement plans that meet the requirements necessary to file an aggregated Form 5500.

To provide DOL and Treasury time to implement this change, this bill has an effective date of no later than January 1, 2023. A copy of the legislative text is available here.

 
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