House Passes Securing a Strong Retirement Act

Bill would require 401(k) and 403(b) plans to automatically enroll eligible participants.

The U.S. House of Representatives has passed the Securing a Strong Retirement Act, which aims to increase retirement plan participation while boosting retirement savings.

The bill, which passed by a vote of 414-5, would require 401(k) and 403(b) plans to automatically enroll participants in the plans once they become eligible, but also allow them to opt out. The initial automatic enrollment amount would be between 3% and 10%, although anything below 10% would be increased 1% annually until it reaches 10%.

The proposed legislation would “help Americans successfully save for a secure retirement by expanding coverage and increasing retirement savings, simplifying the current retirement system, and protecting Americans’ retirement accounts,” House Ways & Means Committee Chairman Richard Neal, D-Massachusetts, said in prepared remarks on the House floor.  

Current 401(k) and 403(b) plans would grandfathered into the legislation; however, there would be an exception for church plans, governmental plans, businesses with 10 employees or fewer, and businesses in operation for less than three years.

While the current three-year small business start-up credit is 50% of administrative costs, up to an annual cap of $5,000, the proposed bill would increase the startup credit to 100% from 50% for employers with up to 50 employees. An additional credit would also be provided, except in the case of defined benefit plans. The amount of the new credit generally would be a percentage of the amount contributed by the employer on behalf of employees, up to a cap of $1,000 per employee.

The bill would also amend securities laws to treat 403(b) plans like 401(a) plans in regards to their ability to invest in collective investment trusts, but only if the plan is subject to the Employee Retirement Income Security Act, its sponsor accepts fiduciary responsibility for selecting the investment choices, the plan is a governmental plan, or the plan has a separate exemption from the securities rules.

Additionally, under current law, employees who are at least 50 years old are allowed to make catch-up contributions under a retirement plan in excess of the otherwise applicable limits. The limit on catch-up contributions for 2021 is $6,500, except in the case of SIMPLE plans for which the limit is $3,000. The bill would increase those limits to $10,000 and $5,000, respectively, for individuals who have reached ages 62, 63, and 64, but not 65.

Retirement plan provider TIAA lauded the proposed legislation, saying it would help increase savings, provide greater access to workplace plans, and simplify and streamline the retirement system.

“If enacted, the SSRA will help more Americans attain a secure financial future and increase their confidence in achieving overall financial well-being,” TIAA President and CEO Thasunda Brown Duckett said in a statement.

However, the U.S. Chamber of Commerce said it strongly opposes two requirements in the bill that it says would hurt many employers’ ability to offer and maintain plans. One is section 101, which expands automatic enrollment in retirement plans, and the other is section 313, which relates to individual retirement plan statute of limitations for excise tax on excess contributions and certain accumulations.

In a letter to the House of Representatives, U.S. Chamber of Commerce Chief Policy Officer Neil Bradley said that while the business organization supports automatic enrollment, it opposes mandating it because the associated costs are too much for some employers. Bradley said a better model for increasing automatic enrollment can be found in section 103 of the Retirement Security and Savings Act, which offers a credit for including automatic enrollment.

He also said section 313 would “effectively require employers to provide paper statements with redundant information at least once a year to all retirement plan participants,” which he added “would increase costs that would likely be passed on to participants.”

The bill now moves to the Senate, which is expected to take up the legislation in April.

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