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Lawmakers Look to ‘Fix’ SECURE Act, Advance Retirement Plan Options


Two Senate bills have been introduced and a bicameral working group formed that seek to ease the administrative burdens for small businesses, as well as expand access to those without an employer-sponsored retirement savings plan. 

Sens. John Hickenlooper (D-CO) and Susan Collins (R-ME), who both sit on the Senate Health, Education, Labor and Pensions (HELP) Committee, on May 5 introduced the Simplifying Small Business Retirement Savings Act (S. 4154) to make it easier for small businesses to access and offer retirement plans for their employees. 

The bill would make two key changes to the pooled employer plan (PEP) and group of plans (GoP) provisions enacted under the SECURE Act in 2019. 

In announcing the legislation, Hickenlooper and Collins explain that companies offering retirement plans typically will pick between trustees of varying responsibility levels to manage plan assets based on what works best for each situation, but the PEP provisions inadvertently restrict providers to using one type of trustee—discretionary trustees. This, they note, has limited the number of PEPs offered to small businesses.

S. 4154 would allow companies administering PEPs to have the option of using Directed Trustees, as well as Discretionary Trustees. According to the sponsors, this new option would expand the marketplace for PEPs, giving small businesses more choices at lower costs.

The legislation also directs the Secretary of Labor to conduct a study on the PEP industry and report on the findings, including any recommendations on how PEPs can be improved. 

“Small businesses don’t have the resources of big companies, yet we treat them the same when it comes to retirement plans,” said Hickenlooper said in a statement. “Cutting this red tape will make it easier for employees to save for retirement and help level the playing field for local businesses.”

Simplified GoP Filing

S. 4154 also seeks to simplify the Form 5500 filing process for a group of plans. Here, the sponsors explain that businesses with fewer than 100 employees are subject to simplified IRS compliance requirements for their retirement plans, but when participating in a GoP, the plan administrator is required to follow the filing process for larger companies, since the number of employees among the pooled small business surpasses 100.

S. 4154 would amend Section 202(a) of the SECURE Act to apply the same process to any retirement plan pool that is made up of small businesses each of 100 employees or fewer, the senators note. 

This bill comes as final regulations implementing changes under the SECURE Act updating the Form 5500 filing requirements for a GoP may be released in the coming weeks. Under the proposed regulations, the Treasury and Labor departments took the position that a large plan that elects to participate in a Defined Contribution Group (DCG)—or what is described as a GoP—must continue to be subject to an independent qualified plan accountant audit (IQPA) and that the audit report for the plan would have to be filed with the consolidated Form 5500 of the DCG reporting arrangement. 

The American Retirement Association subsequently argued that the proposal would increase the filing burden for small plans that may have benefitted from a GoP and that the addition of a trust-level audit was unnecessary and contrary to the statute and its intent. It’s unclear at this point whether the agencies made any changes to the proposed regulations reflecting these concerns. 

Matching Contributions Credit

Hickenlooper also introduced May 5 the Incentivizing Small Business Retirement Savings Act (S. 4153), which would further help small businesses cope with the costs of offering their employees a retirement plan by providing a tax credit for the contributions they make on behalf of their employees. 

Under the legislation, a tax credit of up to $1,000 per non-highly compensated employee would apply, but would be reduced gradually until fully phased out in year five. More specifically, the credit would equal 100% in the first tax year and then would be reduced by 25% each tax year for years two through four. In addition, the credit would apply to businesses with 50 or fewer employees and phase out by 2% for each employee in excess of 50. 

Bicameral Working Group

And in furthering the effort to expand retirement savings options, Hickenlooper and Sen. Thom Tillis (R-NC), along with House Reps. Terri Sewell (D-AL) and Lloyd Smucker (R-PA), announced May 12 that they are forming a bipartisan, bicameral working group to improve retirement security and financial well-being for low- and middle-income American workers. 

The group is working on legislation to strengthen incentives and expand pathways to savings for workers who lack access to employer-sponsored retirement plans, according to the announcement. 

“Federal retirement policies are failing hard-working Americans. Around a quarter of working-age adults have $0 in retirement savings, and millions of working Americans lack access to or do not qualify for employer-sponsored retirement plans,” the group said in a statement. “We know Americans want to be confident in their ability to save for retirement, but too many lack meaningful options. As a core function of government, Congress should enact policies that support retirement saving by all Americans. That is why we are drafting a bipartisan proposal that would help millions of overlooked workers build meaningful savings, achieve financial security and retire with dignity. By investing in American workers, we can build a stronger economy and a more united country.”

The members cited a recent survey by the Economic Innovation Group, noting that 81% of voters are concerned about retirement security and only 42% believe that the next generation will be financially better off than their own generation.

This activity all comes as the House of Representatives in March approved the Securing a Strong Retirement Act of 2022 (H.R. 2954)—a.k.a. SECURE Act 2.0—by a nearly unanimous vote. This bill is now pending in the Senate, where the Senate Finance and HELP committees are anticipated to take up similar legislation.