Five Senate Finance Committee members are asking Treasury Secretary Jack Lew for some retirement plan relief.
The letter — signed by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Sens. Debbie Stabenow (D-Mich.), Ben Cardin (D-Md.), Sherrod Brown (D-Ohio) and Bill Nelson (D-Fla.) — cites testimony provided in a committee hearing earlier this year and several new “commonsense suggestions” that the group said “could go a long way towards helping Americans save for retirement,” including several that ASPPA and NAPA have been active in promoting.
Automatic Enrollment Relief
The senators acknowledged the impact of automatic enrollment but noted that data compiled by Senate Finance Committee staff indicated that in 2012, only 11% of 401(k) plans had an automatic enrollment feature. The percentage was even smaller among small plans — only 3% among 401(k) plans with less than 100 participants.
The senators noted that small employers do not embrace automatic enrollment in part because of concern over the penalties if they make a mistake, and urged changes to the Employee Plans Compliance Resolution System (EPCRS) that would encourage companies to include automatic enrollment provisions in their plans — encouraging Lew to “have a dialogue with stakeholders regarding how best to protect employees and at the same time eliminate material disincentives for small business to adopt automatic enrollment.” In September 2012, ASPPA and the Council of Independent 401(k) Recordkeepers (CIKR) outlined a series of recommendations that would do just that.
MEPs
The senators also cited greater use of multiple employer plans (MEPs) as a means of enhancing small business retirement plan coverage. However, they noted that under current Treasury regulations, if one employer participating in a MEP violates the tax qualification rules, the entire plan could be disqualified (the so-called “one bad apple” rule). The senators call on Treasury to “revisit this regulatory position, which discourages multiple employer plans.” ASPPA has previously outlined a series of recommendations to facilitate the responsible growth of MEPs, including the “one bad apple” rule.
‘Other’ Incentives
Finally, the senators specifically cited testimony regarding the current prohibitions on 401(k) and 403(b) plans from offering small financial rewards, such as providing every worker who enrolls in the plan with a $25 gift card. The restriction, under Code Section 401(k)(4)(A), states that a 401(k) plan will not be treated as a qualified plan if any “other benefit” (other than a matching contribution) is contingent on making a salary deferral contribution to the plan. The senators urged Treasury to amend the regulation to provide for an exception to the “other benefit” for incentives “small enough that they do not undermine employers’ motivation to provide matching contributions but are large enough to have an impact on savings by low and moderate income employees.”
The letter — signed by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Sens. Debbie Stabenow (D-Mich.), Ben Cardin (D-Md.), Sherrod Brown (D-Ohio) and Bill Nelson (D-Fla.) — cites testimony provided in a committee hearing earlier this year and several new “commonsense suggestions” that the group said “could go a long way towards helping Americans save for retirement,” including several that ASPPA and NAPA have been active in promoting.
Automatic Enrollment Relief
The senators acknowledged the impact of automatic enrollment but noted that data compiled by Senate Finance Committee staff indicated that in 2012, only 11% of 401(k) plans had an automatic enrollment feature. The percentage was even smaller among small plans — only 3% among 401(k) plans with less than 100 participants.
The senators noted that small employers do not embrace automatic enrollment in part because of concern over the penalties if they make a mistake, and urged changes to the Employee Plans Compliance Resolution System (EPCRS) that would encourage companies to include automatic enrollment provisions in their plans — encouraging Lew to “have a dialogue with stakeholders regarding how best to protect employees and at the same time eliminate material disincentives for small business to adopt automatic enrollment.” In September 2012, ASPPA and the Council of Independent 401(k) Recordkeepers (CIKR) outlined a series of recommendations that would do just that.
MEPs
The senators also cited greater use of multiple employer plans (MEPs) as a means of enhancing small business retirement plan coverage. However, they noted that under current Treasury regulations, if one employer participating in a MEP violates the tax qualification rules, the entire plan could be disqualified (the so-called “one bad apple” rule). The senators call on Treasury to “revisit this regulatory position, which discourages multiple employer plans.” ASPPA has previously outlined a series of recommendations to facilitate the responsible growth of MEPs, including the “one bad apple” rule.
‘Other’ Incentives
Finally, the senators specifically cited testimony regarding the current prohibitions on 401(k) and 403(b) plans from offering small financial rewards, such as providing every worker who enrolls in the plan with a $25 gift card. The restriction, under Code Section 401(k)(4)(A), states that a 401(k) plan will not be treated as a qualified plan if any “other benefit” (other than a matching contribution) is contingent on making a salary deferral contribution to the plan. The senators urged Treasury to amend the regulation to provide for an exception to the “other benefit” for incentives “small enough that they do not undermine employers’ motivation to provide matching contributions but are large enough to have an impact on savings by low and moderate income employees.”
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