Two U.S. senators have introduced bipartisan legislation aimed at reducing the costs of small business pension plans by allowing expenses to be reimbursed from plan assets.
The Expanding Small Business Retirement Choices Act, sponsored by Sen. Jacky Rosen (D-Nev.) and Tim Scott (RS.C.), would amend the Employee Retirement Income Security Act of 1974 to allow small business employers to use pension plan funds to pay for expenses associated with pension plan design changes. Proponents of the bill say it will reduce the cost of providing plans for small business owners.
Currently, employers must pay an upfront administrative fee if they want to offer a 401(k) plan or if they want to change their retirement plan design, such as adding auto-enrollment or auto-escalation. .
“This bipartisan legislation will ensure small business workers have access to high-quality retirement benefits without facing a cost barrier,” Rosen said in a statement. “Removing this bureaucratic red tape and added costs will strengthen small businesses and provide their employees with the best and most comprehensive retirement plans possible.” [Source]
The bill notes that a fee is charged to a pension plan whenever its sponsors hire advisers to help administer the plans, as these advisers are paid through monthly or annual fees. He also points out that if a plan sponsor inquired about a plan design feature, such as auto-enrollment and auto-re-enrollment or auto-escalation, the advisor or other service provider would charge the employer an amount separate that could not be billed back to the plan.
“Because these surveys incur additional costs, many employers, especially smaller employers, choose to forgo these ancillary plan design features, even when they could generate enormous benefits for their employees,” the text reads. Bill.
The legislation cites the Plan Sponsor Council of America’s 2021 survey of profit sharing and 401(k) plans which found that only 30.5% of employers with fewer than 50 workers have an auto-enrollment feature in their pension plan, compared to more than 77% of employers with more than 1,000 workers.
“Innovative plan design features such as automatic enrollment and financial wellness programs have been shown to have a huge impact on the financial health and retirement security of working Americans,” said Brian Graff. , CEO of the American Retirement Association, in a statement. “The increased flexibility to cover the expenses associated with these programs means that more employers, and especially small business owners, will now be able to offer these benefits to even more workers.”
The bill is the latest piece of legislation making the rounds in Congress that aims to improve retirement savings and participation. Earlier this year, the US House of Representatives passed the Securing a Strong Retirement Act, which aims to increase retirement plan participation while increasing retirement savings. The bipartisan Employee Lifetime Income Act of 2022, which was introduced in March, would allow pension plan sponsors to provide annuities as the default option in their DC plans. And the Automatic Re-enrollment Act of 2022, also introduced in March, aims to increase worker participation in employer-sponsored pension plans by encouraging pension plans to automatically re-enroll workers.
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Tags: bipartisan bill, Increase Small Business Retirement Choices Act, Jacky Rosen, Plan Sponsor Council of America, Plan Sponsors, retirement plan, small business, Tim Scott