U.S. Reps. Darin LaHood (R-IL) and Linda Sánchez (D-CA) introduced legislation to expand retirement savings access.
The Starter-K Act creates starter defined contribution plans that streamline regulations and lower costs for small businesses and start-ups. It is designed to fill a void as only half of small businesses with fewer than 50 employees currently provide a retirement plan for their employees.
Specifically, with the Starter-K Act, employers are not required to provide matching contributions, which would lower costs for small businesses and start-ups. It would also streamline regulations by providing employers a safe harbor for the nondiscrimination and top-heavy testing requirements for defined contribution plans.
Annual contributions would be limited to $6,000, indexed to inflation – with an additional catch-up contribution for those at least age 50. Eligible employees are automatically enrolled at the minimum default level of 3 percent of pay. It also directs the Department of Labor (DOL) to provide simplified reporting for the plans.
“In Illinois and throughout America, small businesses are the biggest employers, and they should be able to provide their workers with better options to save for retirement,” LaHood said. “Our bipartisan legislation will remove unnecessary, complex regulations to allow more small businesses to offer retirement plans and help more Americans secure their financial future.”
Companion legislation was introduced in the Senate by U.S. Sens. John Barrasso (R-WY) and Tom Carper (D-DE).
“Small businesses fuel our economy and allow our communities to thrive,” Sánchez said. “Unfortunately, the hard-working Americans who keep our small businesses running are often left with few options to save for retirement. This legislation will help small business owners provide their employees with streamlined, cost-effective retirement plans, ensuring more Americans can retire with financial peace of mind.”