The House Ways and Means Committee passed this unanimously Securing a strong retirement law by 2021Among other things, this is intended to make it easier for small companies to introduce and maintain a company pension plan.
“This legislation expands automatic enrollment, simplifies many rules for retirement plans, and strengthens the ability of small businesses to offer company retirement plans,” said Richard Neal, chairman of the Ways and Means Committee, D-Massachusetts, and ranking member Kevin Brady, R- Texas, in a statement. “The passage of this law is a tremendous bipartisan achievement and an achievement for our entire committee.”
The bill, also known as the “SECURE Act 2.0,” referring to the 2019 Every Community Up for Retirement Enhancement Act (SECURE), would require 401 (k) and 403 (b) plans in order to attendees Automatically enroll in the plans once you become eligible while employees have the option to opt out of coverage. The initial auto-enrollment amount would be between a minimum of 3% and a maximum of 10%. If a participant’s deferral is less than 10%, it is increased by 1% each year until it reaches 10%.
All current plans 401 (k) and 403 (b) would feed into legislation; However, there would be an exception for church plans, government plans, businesses with 10 or fewer employees, and businesses that have been in operation for less than three years.
While the current three-year small business start-up loan is 50% of administrative costs up to an annual cap of $ 5,000, the proposed bill would increase this loan to 100% for employers with up to 50 employees and provide an additional loan except for defined benefit plans (DB) . The size of the new loan is generally a percentage of the amount the employer brings in on behalf of the employees, up to a limit of $ 1,000 per employee.
The bill also provides that 403 (b) custody accounts are allowed to invest Collective Investment Trusts (CITs). It would change securities laws to treat 403 (b) plans like 401 (a) plans in terms of their ability to invest in CITs – as long as the plan is subject to the Employee Retirement Income Security Act (ERISA), its sponsor accepts a trustee Responsible for making investment decisions, the plan is a government plan or the plan has a separate exception to securities rules.
In addition, employees who are at least 50 years old may, under applicable law, make catch-up contributions within the framework of a pension plan that go beyond the otherwise applicable limits. The 2021 catch-up limit is $ 6,500, except in the case of SIMPLE plans – or employee savings incentive match plans – for which the limit is $ 3,000. The bill proposes increasing these limits to $ 10,000 and $ 5,000, respectively, for people aged 62, 63 and 64 years old, but not for 65 years of age.
Auto-enrollment has increased the participation of eligible employees in general, but particularly among Black, Latin American, and low-wage workers, according to proponents of the bill.
The House Ways and Means Committee cited a study that found that auto-enrollment increased the participation of short-term Latino employees in a 401 (k) plan from 19% to 75%. And a study by Ariel Aon-Hewitt found that auto-enrollment plans have seen enrollment rates rise most dramatically among younger, low-paid employees, and that auto-enrollment nearly eliminates the racial divide in participation rates.
The bill is supported by groups such as the American Retirement Association (ARA) and the Securities Industry and Financial Markets Association (SIFMA).
“A number of provisions contained in this legislation would improve and support retirement provision,” said Kenneth Bentsen, President and CEO of SIFMA, in one Letter of support submitted to the Ways and Means Committee. “This legislation also improves the overall system by enabling 403 (b) plans to invest in CITs and expanding opportunities for military spouses, along with other improvements to the pension system.”