Senate Hearing Highlights Small Biz MEP Opportunities
Discussing alternatives to encourage small businesses to offer retirement plans, a Senate subcommittee found consensus around a specific solution.
Senate Health, Education, Labor and Pensions Subcommittee on Primary Health and Retirement Security Chairman Sen. Michael Enzi (R-Wyo.) convened a roundtable discussion
, “Retirement Plan Options for Small Businesses,” on Oct. 28. A consensus emerged from the discussion that a good first step would be to promptly enact federal legislation opening up multiple employer pension (MEP) plans to more private-sector employers.
The panel of witnesses, including representatives from the U.S. Chamber of Commerce, Principal Financial Group, Prudential and AARP, agreed that the current Department of Labor (DOL) requirements that there be a relationship between employers who wish to join a MEP are hindering the availability of MEPs in the marketplace. The panelists argued that making MEPs more widely available to small businesses could lower employer costs and administrative hassles and allow employers to shift liability for certain plan decisions to others, all of which were cited as key barriers to small business plan formation.
Sen. Sheldon Whitehouse (D-R.I.), a member of the subcommittee, pitched his legislation
, which would require employers with 10 or more employees to offer some type of retirement plan for eligible workers, including an automatic enrollment payroll deduction IRA. His bill also includes a provision directing the DOL and Treasury to issue guidance that simplifies ERISA reporting requirements for MEPs and shields employers participating in a MEP from liability and penalties should the bad actions of another participating employer threaten the tax status of the entire MEP.
AARP, a strong advocate of Whitehouse’s approach, has been active at the state level in pushing legislation that would require employers over a certain size to offer a retirement plan for private sector workers coupled with the creation of a state based auto-IRA program to be used as the default arrangement to meet that requirement. Indeed, currently three states — California, Illinois and Oregon — are in the process of enacting laws with this structure, and more than 20 other states across the country are considering similar approaches.
These laws have yet to be implemented, but the progress at the state level in pursuing these programs has put pressure on the DOL to issues new regulations — expected to be issued by the end of the year — to facilitate them. The Department of Labor has also indicated that it will issue guidance for the states to adopt an ERISA-covered MEP program that the states could use, rather than offering a payroll deduction IRA arrangement as the default option.
Previous legislation backing MEPs includes Sen. Orrin Hatch’s SAFE Retirement Act, as well as the Retirement Security Act of 2015 (HR 557) introduced by Reps. Vern Buchanan (R-Fla.) and Ron Kind (D-Wisc.) in the House of Representatives. A companion bill, the Collins-Nelson Retirement Security Act of 2015 (S. 266) was introduced in the Senate earlier this year by Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.).Andrew Remo is the American Retirement Association’s Director of Congressional Affairs.