Bipartisan Retirement Bills Emerge in House and Senate
The 114th Congress has gotten off to a quick start with retirement legislation.
During the week of Jan. 25, Collins-Nelson Retirement Security Act of 2015
(S. 266) was introduced
in the Senate, while a companion bill, the Retirement Security Act of 2015
(H.R. 557) was introduced in the House. The former was sponsored by Sens. Susan Collins (R-Maine) and Ben Nelson (D-Fla.), the latter by Reps. Vern Buchanan (R-Fla.) and Ron Kind (D-Wisc.). In a press release announcing the bill, Buchanan said he worked with Collins in drafting the legislation “to give it the best possible chance of passing both the House and Senate this Congress.”
Both were positioned as encouraging more small employers to offer retirement plans, providing incentives for employees to save more for retirement and ensuring that low and middle-income working families are able to claim benefits for retirement savings already authorized by law.Backing MEPs
Noting that cost is a significant reason why more small businesses do not offer retirement plans, the bills would lower costs by allowing small businesses (those with up to 500 employees) to join multiple employer plans (MEPs) to share the administrative burden of a retirement plan.
Also noting that under current law, one business’s failure to meet the minimum criteria necessary to maintain a tax-preferred retirement plan can endanger benefits for all MEP participants, the bills direct the Treasury Department to issue regulations to address this issue, and attempt to reduce costs for all businesses by directing Treasury to “simplify, clarify, and consolidate notice requirements for retirement plans.”Encouraging Auto-enrollment
Noting that the existing safe harbor for so-called “automatic enrollment” plans effectively caps employee contributions at 10% of annual pay, with the employer contributing a “matching” amount on up to 6%, the bills would create an additional safe harbor for these plans that would allow employees to receive an employer match on contributions of up to 10% of their pay, while allowing workers to be able to contribute more than 10%, albeit without an employer match.
The bills also aim to help the smallest businesses — those with fewer than 100 employees — offset the cost of this additional match by providing a new tax credit equal to the increased match.Expanding Saver’s Credit Access
While the tax code currently provides a nonrefundable credit of up to $1,000 for eligible individuals ($2,000 for joint filers) who contribute to IRAs or employer-sponsored retirement plans, it cannot be claimed on a Form 1040EZ. The bills would direct Treasury to make the credit available on Form 1040 EZ.