For the first time, the Retirement Enhancement and Savings Act (RESA) has gotten some traction in the U.S. House of Representatives – and on a bipartisan basis.
Reps. Mike Kelly (R-PA) and Ron Kind (D-WI) – along with 14 other Democratic and Republican cosponsors – introduced H.R. 5282 in the House of Representatives on March 14. The language of H.R. 5282 is identical to its companion bill in the Senate, S. 2526, which was resurrected earlier this month by Sens. Orrin Hatch (R-UT) and Ron Wyden (D-OR) – the leaders of the Senate Finance Committee – from the ashes of the last session of Congress, where the bill had received unanimous, bipartisan support in that committee but was never taken up by the full Senate.
RESA includes several provisions that, taken together, will make it easier for small businesses to adopt and maintain a workplace retirement plan. Specifically, the legislation would provide a more generous tax credit of up to $5,000 to defray the cost of starting a retirement plan and add an additional tax credit for plan designs with an automatic enrollment feature. It also enhances automated saving by removing the 10% cap on automatic employee contribution rate increases.
RESA also aims to expand retirement plan coverage by allowing two unrelated employers to join a pooled employer plan provided that there is a designated entity willing to take responsibility for the proper operation of the pooled employer plan. RESA gives small business owners up until the due date of the employer’s tax return to decide whether to adopt a qualified retirement plan.
Finally, RESA improves upon the existing 401(k) safe harbor plan design by giving small business owners more flexibility to switch to a safe harbor plan provided they make a 3% nonelective contribution for all eligible participants if the switch is made during the plan year or a 4% nonelective contribution if the switch is made after the end of the plan year.
It is now clear that this package of provisions enjoys bipartisan and bicameral support with significant political momentum. But will that momentum be enough for RESA to take a ride on a must-pass legislative vehicle in 2018? If so, we could see RESA be the new law of the land in short order.
Andrew Remo is the American Retirement Association’s Director of Legislative Affairs.