Bipartisan Bill Boosts Small Biz Retirement Plans

Bipartisan legislation has been introduced in Congress to make it easier for small businesses to set up retirement programs for employees.

The Small Business Employee Retirement Savings Act, introduced by Sens. Richard Burr (R-N.C.) and Michael Bennet (D-Colo.), would increase the retirement plan start-up tax credit to $5,000, incentivize auto enrollment and remove restrictions to increase employee participation in retirement plans.

According to a press release, the bill includes three key provisions that make is easier for employees of small businesses to prepare for retirement:

Increasing the Size of the Start-up Credit From $500 to $5,000

Currently, small businesses (those with fewer than 100 employees) receive a tax credit totaling the lesser of either 50% of the costs of establishing a new retirement plan or $500. The credit can be taken for three years and can be used to offset the costs for starting up a new 401(k) plan, a SIMPLE retirement plan or a simplified employee pension (SEP).

Creating a Credit for New Plans That Offer Auto Enrollment

The bill creates a new tax credit of $500 per year for up to three years for small businesses that offer new retirement plans that include auto enrollment. It would also apply to businesses that add auto enrollment to an existing retirement plan.

Eliminating the 10% Auto Enrollment Limit

The Pension Protection Act of 2006 included a specific reference to a 10% limit on the escalation of automatic enrollment. The bill would eliminate that limit.

The text of the legislation is available online here.

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