U.S. Sens. John Hickenlooper (D-CO) and Susan Collins (R-ME) introduced legislation last week to make it easier for small businesses to offer retirement plans for their employees.
The Simplifying Small Business Retirement Savings Act Retirement Savings Act would allow companies administering Pooled Employer Plans to have the option of using directed trustees, an industry standard for large companies, as well as discretionary trustees. Currently, they do not have the option to use directed trustees. This new option would expand the marketplace for Pooled Employer Plans, giving small businesses more choices at lower costs.
The bill would also simplify IRS filing for small business retirement plans. Currently, small businesses with up to 100 employees have simplified IRS compliance requirements for their retirement plans, while those with more than 100 employees must adhere to a more complex filing process. This bill would apply the same simplified process to any retirement plan pool made up of small businesses with up to 100 employees.
“Making it easier and more affordable for smaller businesses to offer retirement plans is key to helping many Americans prepare for their golden years,” Collins said. “In 2019, legislation I co-authored to reduce the cost and complexity of retirement plans was signed into law, expanding employees’ access to these savings options. By building on this effort, our bipartisan bill would make a significant difference in helping individuals save more for retirement.”
Small businesses employ nearly half of American private-sector workers. Still, due to regulatory complexity, only 53 percent of workers at small businesses have access to a retirement plan compared to 85 percent of employees at larger companies.
“Small businesses don’t have the resources of big companies, yet we treat them the same when it comes to retirement plans,” Hickenlooper said. “Cutting this red tape will make it easier for employees to save for retirement and help level the playing field for local businesses.”