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Senators Propose Legislation to Improve Retirement Security for Gig Workers
The package includes four coordinated bills, which are designed to expand portable workplace benefits, including health care and retirement savings, while providing legal clarity about worker classification.
Senators Bill Cassidy, R-Louisiana, chair of the Senate Committee on Health, Education, Labor and Pensions, Tim Scott, R-South Carolina, and Rand Paul, R-Kentucky, introduced legislation on July 7, aimed to improve the retirement security of freelance and gig workers.
The package includes four coordinated bills: the Independent Retirement Fairness Act, the Unlocking Benefits for Independent Workers Act, the Modern Worker Empowerment Act and the Association Health Plans Act. Together, the measures are designed to expand portable workplace benefits, including health care and retirement savings, while providing legal clarity on worker classification.
“Outdated labor laws should not prevent workers from receiving health care or saving for a secure retirement,” Cassidy said in a statement. “Modernizing our federal labor laws ensures all independent workers can access workplace benefits without losing their flexibility to work how and when they want.”
The Independent Retirement Fairness Act proposes major reforms to extend retirement benefits and simplify pension access for independent workers, freelancers and contractors who have traditionally not had access to employer-sponsored retirement plans.
The legislation would amend the Employee Retirement Income Security Act and the Internal Revenue Code to allow independent workers to participate in pooled employer plans, also known as PEPs, a type of multiple-employer retirement plan typically reserved for traditional employees. Under the proposed changes, trade associations could act as surrogate employers, enabling gig workers to contribute to retirement plans as if they were company employees.
In April, Cassidy published a white paper suggesting solutions for gig workers’ lack of retirement security, many of which are included in the bill.
Key provisions of the Independent Retirement Fairness Act include:
- PEP access for gig workers: Independent workers will be treated as eligible participants in pooled employer plans without altering their employment classification under federal or state law;
- Simplified employee pension reforms: Employers would be allowed to treat independent workers like employees for the purpose of SEP contributions. These workers could also opt to redirect year-end bonuses into retirement accounts;
- Suspension accounts: The bill introduces a new flexible savings mechanism called a “suspension account,” enabling gig workers to temporarily hold funds earmarked for retirement until they decide whether to deposit them into a PEP or SEP account—or withdraw the funds in cash;
- Streamlined auditing: To reduce administrative burdens, the bill simplifies audit requirements for pooled and group retirement plans by narrowing the scope of financial oversight to relevant portions of the plans; and
- Pilot programs: The Department of Treasury and the Department of Labor will be tasked with launching pilot programs designed to encourage gig workers to save small amounts of their income. One initiative would allow rounding down paychecks to funnel spare change into retirement savings automatically.
The bill is Cassidy’s latest of several attempts at addressing the retirement shortfall for gig workers, a population in which only 21.9% participated in a workplace defined contribution plan, according to a 2021 Pew Research study.
If enacted, the reforms would take effect for taxable years and plan years beginning after the date of the law’s passage.
The Independent Retirement Fairness Act is currently under review by the Senate Committee on Health, Education, Labor, and Pensions as have the other proposed bills.
Meanwhile, Scott’s Modern Worker Empowerment Act would create a consistent federal test for determining who qualifies as an employee or as an independent contractor, replacing the patchwork of conflicting standards that does not consistently differentiate between the two. The Association Health Plans Act, introduced by Paul, would enable independent workers and small businesses to band together and purchase health insurance through Association Health Plans. The Congressional Budget Office previously estimated that this could extend coverage to hundreds of thousands of uninsured Americans.
“Empowering our workers with modern tools and flexible opportunities is essential for strengthening our economy and ensuring they can succeed in today’s dynamic job market,” Scott said in a statement. “This legislation reflects our commitment to innovation, flexibility, and growth for all Americans.”
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