Lawmakers see momentum for bills promoting workplace retirement plans

As lawmakers work to put the finishing touches on legislation that would give employers new flexibility in their retirement plans, members of the Senate are looking ahead to new bills to further encourage workplace savings.

Members of the Senate Finance Committee say they are hopeful about getting some version of the Retirement Enhancement and Savings Act to the president's desk this year. If the measure became law, businesses in varied industries could band together in multi-employer plans and would enjoy relief from some of the administrative and legal liabilities those plans entail.

“Its centerpiece expansion of open MEPs and other common sense changes would make it more feasible for businesses of all sizes to offer retirement plans by harnessing economies of scale and reducing unnecessary burdens on employers,” Chuck Grassley (R-Iowa), the bill's sponsor and chair of the Finance Committee, said this week at a hearing on the issue.

Ron Wyden (D-Oregon), a RESA co-sponsor and the ranking Democrat on the committee, said the bill “should have become law eons ago.”

“The bill is all about making it easier — particularly for small employers — to offer retirement plans to their employees,” Wyden said.

The backdrop to any discussion of retirement policy is of course a mounting sense of urgency that Americans aren't saving enough to retire comfortably. The AARP has an oft-cited statistic from a study finding that employees are 15 times more likely to save for retirement if they have access to a plan at work, yet tens of millions don’t.

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The U.S. Capitol stands before sunrise in Washington, D.C., U.S., on Friday, Oct. 20, 2017. President Donald Trump's top legislative priority took a major step forward as the Senate narrowly approved a budget vehicle for tax cuts -- but sharp divides over an array of non-binding amendments revealed the towering challenge he faces from here. Photographer: Bloomberg/Bloomberg

“Our first goal should be to provide a workplace retirement plan for the 51 million Americans who lack one now,” said AARP Board Chair Joan Ruff.

The AARP has been focusing much of its recent work on encouraging states to develop programs that would encourage (or require) employers to offer workers some form of retirement plan, as Oregon and a handful of other states have been doing. Ruff lauds the legislative proposals U.S. lawmakers are considering, but urges Congress to reject any provisions that would preempt state efforts.

“We believe that state programs and federal legislation working together can most effectively offer Americans affordable and appropriate retirement investments,” Ruff said.

Witnesses at this week’s hearing encouraged lawmakers to enact some version of RESA while also looking ahead to “next-generation” retirement legislation. Committee members have a few ideas for further changes to the rules for employer plans.

This week Sens. Rob Portman (R-Ohio) and Ben Cardin (D-Md.) introduced a bill that would provide a menu of tax incentives for employers to set up retirement plans with more generous benefits for their workers. The Retirement Security and Savings Act would extend the maximum tax credit for small businesses that set up a new plan from $500 to $5,000, and set a three-year tax credit of $500 for employers that automatically re-enroll employees in the plan at least once every three years.

Further, the bill would offer a tax credit to businesses that set higher default deferral rates for employee contributions.

Meantime, on Monday, Sen. Ron Wyden and a handful of Democrat co-sponsors introduced a bill that would permit employers to make matching contributions to a 401(k) plan if the employee was paying down student loan debt, but not contributing to the retirement plan. Under current law, matching contributions are only permitted if the employee pays into the retirement plan. Backers of the bill argue that too many younger workers are swamped by loan debt and unable to contribute to a retirement plan, and note that policymakers should still encourage them to begin saving for retirement.

“Millions of college grads are buried under tens of thousands of dollars in student loan debt that prevents them from building their future.” Sen. Ron Wyden (D-Oregon)

“Millions of college grads are buried under tens of thousands of dollars in student loan debt that prevents them from building their future,” Wyden said in a statement announcing his bill. “The sooner workers start to save for retirement the better, and paying down student loans shouldn't stop them from building their nest egg.”

A provision similar to the Wyden bill is included in the more comprehensive Retirement Security and Savings Act.

But RESA appears to be the closest to final passage, with a very similar bill having cleared committee and awaiting consideration on the House floor.

Grassley is hoping to reconcile those two bills into a final version this year, though he expressed reservations about a provision in the House version that would require employers to offer access to a retirement plan to tenured part-time workers.

Lynn Dudley, a senior vice president at the American Benefits Council, acknowledged that such a move could entail an added compliance burden, but offered support for the measure in light of the limited application to longstanding part-time workers.

“Our plan sponsor members, they have had some administrative concerns in the past over this, but they're very comfortable with the idea that going forward we need to give access to people that are working part-time, especially over a consistent period as more people do have part-time jobs for longer periods of time,” Dudley said.

For employers, particularly small ones, RESA and the SECURE Act seek to eliminate some of the most significant barriers to joining a multi-employer plan, which can offer more favorable pricing and plan options than would be available to a small firm looking to set up its own plan.

In addition to removing the so-called common bond requirement to facilitate open MEPs, RESA would allow the participating companies to work with a third-party administrator to oversee the plan, who would then take on the attendant fiduciary responsibilities.

The bill would also shield plan sponsors from the fiduciary liabilities that can arise when offering an annuitized version of a 401(k) or similar plan.

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