Tax reform isn’t the only newsworthy event affecting the benefits industry–several bills were introduced in Congress at the end of 2017 that could dramatically impact certain kinds of retirement plans. While these new proposals have an uncertain future, they all signal Congressional interest in improving retirement security. Here are some common trends news that you may see affecting your retirement plans soon.
Increase access to multiple employer plans (MEPs)
The Small Businesses Add Value for Employees Act (SAVE Act, HR 4637) removes the “common bond” requirement, thereby making it easier for small businesses to pool together, regardless of industry, and offer retirement plans to their employees while alleviating some burdens of plan administration.
The Retirement Security Act of 2017 (SB 1383) offers employers a tax credit and protects employees from losing their tax benefiits if one employer in a MEP fails to meet the participation criteria. Similarly, the Auto401k Act (HR 4523) provides relief from the “one bad apple” rule of MEPs so that all participating employers are not penalized when one employer violates the qualification rules.
Incentivize small businesses to offer retirement benefits
Through tax credits and other incentives, Congress is attempting to make retirement plans more accessible and promoting lifetime income solutions.The Retirement Plan Simplification and Enhancement Act (RPSEA; HR 4524) would increase the current automatic enrollment safe harbor cap and encourage employers to defer more than the automatic deferral floor of 3% of salary in the first year. It would also exempt retirement savings below $250,000 from complicated required minimum distribution rules and make it easier to take advantage of the saver’s credit. The SAVE Act increases the limit on elective deferrals under a simple IRA and permitting employers to make non-elective contributions for their employees of up to 10% of pay.
Reduce administrative burdens for plan sponsors
Congress is also addressing some of the lesser-known, but equally painful administrative burdens of sponsoring retirement plans. Access to a Secure Retirement Act (HR 4604) corrects some of the confusing regulations that often stop employers from including a guaranteed lifetime income product in their benefits package.
The Receiving Electronic Statements to Improve Retiree Earnings Act (RETIRE Act HR 4610) allows plan sponsors to use electronic delivery as the default distribution method for retirement plan notices and documents. A companion Senate bill is expected soon and the timing coincides with an effort by the Employee Benefits Security Administration’s project to address electronic delivery.
Staying on top of these bills can help eliminate the often confusing world of government. As Congress continues to takes steps to help plan sponsors, we will keep you updated on the way new legislation is affecting your clients. That way, as client questions come about surrounding what they hear in the news – their trusted advisor has the answers.