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PSCA Executive Reports

July 31, 2018

Retirement Legislation

Also in late July Senators Heidi Heitkamp (D-ND), Tom Cotton (R-AR), Cory Booker (D-NJ), and Todd Young (R-IN) introduced the following four bills aimed at helping Americans save for retirement.

  • The Small Business Employees Retirement Enhancement Act (S.3219).  The bill is similar to the “open” multiple employer plan provision in the Retirement Enhancement and Savings Act (“RESA”, S. 2526, H.R. 5282, summary). However, it goes further by eliminating fiduciary responsibility for small employers that participate in a registered pooled employer plan in the selection and monitoring of those MEPs (plan sponsors retain responsibility for ensuring that the fees charged are “reasonable”). 
  • The Retirement Security Flexibility Act (S.3221). The bill updates the safe harbor deferral rate adopted by the Pension Protection Act of 2006 for plans that automatically enroll employees.   The new limits would be:
    - A contribution limit of 80% of the otherwise allowable maximum (currently $18,500) with employer non-elective contributions of 2% or 2.5% matching contributions, or
    - A contribution limit of 60% of the otherwise allowable maximum with 1% non-elective contributions or 1.5% matching contributions, or
    - A contribution limit of 40% of the otherwise allowable maximum with no employer non-elective or matching contributions.

    It also modifies the existing safe harbor by increasing the automatic escalation limit to 15% from 10%. If an employee chooses not to participate in automatic deferrals or participates at a rate lower than 3%, the employee may be automatically re-enrolled every three years unless the employee affirmatively opts out.
  • The Strengthening Financial Security Through Short-Term Savings Act (S.3218). The bill seeks to permit employers to automatically enroll employees in short-term savings accounts by expanding ERISA preemption to cover such payroll deduction arrangements so participants can prepare for financial emergencies.  The accounts could be a “side-car” account within the existing retirement savings plan, or a separate bank or credit union account.  The accounts would have a maximum balance limit of $10,000 and would be subject to “reasonable, limited restrictions” on withdrawals.  Employees could request distribution of the  entire account balance within five days of  termination.  
  • The Refund to Rainy Day Savings Act (S.3220). The bill would allow individuals to earmark 20% of their tax refund to be deposited into a special Treasury account that would earn modest interest and be refunded to the taxpayer after six months.

With the Senate focused on passing RESA, these proposals stand little chance of passage this year. The bills’ sponsors acknowledged as much and have indicated that they intend their proposals to be considered after RESA passes. 

Although many stakeholder groups have declined to take a position on the bills at this point, some have expressed concerns.  For example, PSCA’s parent organization, the American Retirement Association expressed the concern that the Small Business Employees Retirement Enhancement Act would threaten fiduciary protections for participants in plans with 100 or less participants

On July 14, Senators Susan Collins (R-ME) and Mark Warner (D-VA) introduced the SIMPLE Plan Modernization Act (S. 3197) that would increase the contribution limits for SIMPLE plans from $12,500 to $15,500 and modernize some existing SIMPLE administrative requirements. SIMPLE plans may be offered by small businesses with fewer than 100 employees. According to Senator Collins’ press release, AARP supports the legislation. 


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