Last week, we reported that Congress seems to be on track to pass sweeping legislation that would make major changes to 401(k) retirement plans. In related news, both the House and Senate have introduced twin bills, each christened the “Retirement Enhancement and Safety Act” (“RESA”), each of which is focused on 401(k) plans. These proposals each mirror a similar proposal that was approved by the Senate Finance Committee in 2016 but later died on the vine when Congress adjourned before taking action. The chief emphasis of these bills is distinct from the separate set of proposed changes that we reported on last week.
Both the current House and Senate versions of RESA, which reportedly enjoy bipartisan support, would amend ERISA to allow companies to jointly offer what are called “multiple employer retirement plans,” or MEPs. This idea has been around for some time, but has never managed to gather much traction.
Generally stated, MEPs would permit unrelated companies to jointly offer 401(k) retirement plans, which could be a boon for small companies that would like to set up such plans, but lack the resources needed to shoulder the considerable administrative costs. Because of their complexity and costs, many small businesses are not able to offer these plans on their own. RESA would allow multiple companies to rely on a single plan document and one set of plan-related paperwork (governmental filings, etc.), allowing the sponsoring companies to pool many of the administrative expenses.
In addition, the bills would reportedly increase the tax credits small businesses can claim for establishing retirement savings plans from $500 to up to $5,000 for each of the three years following start up. RESA would also permit auto enrollment.
Other provisions would reportedly include:
- RESA would provide fiduciaries a safe harbor for the selection of a lifetime income provider; and
- It would improve the portability of lifetime income options from one plan to another.
Meanwhile, there has been little “new” news with respect to the proposed changes we reported on last week, and we still do not know the Administration’s stance on these or other retirement provisions. There is a push to enact some type of “Tax Reform 201” legislation before the election, which could include some type of 401(k) plan changes, so stay tuned – this summer could be a bumpy ride.