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.

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“Outdated labor laws should not prevent workers from receiving health care or saving for a secure retirement,” Cassidy said in a statement.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.”

DOL Files Amicus Brief in Support of Companies in 401(k) Plan Forfeiture Complaints

In filing an amicus brief to an appeal involving HP Inc., the Department of Labor offered guidance on an issue that has prompted dozens of new cases this year.

The U.S. Department of Labor filed a legal brief siding with HP Inc. in a dispute over how the company managed forfeited funds within its 401(k) retirement plan. The case, Hutchins v. HP Inc., challenges the legality of HP’s use of unvested matching contributions, a subject which has prompted more than 50 complaints this year under the Employee Retirement Income Security Act.

The lawsuit was filed in 2023 by Paul Hutchins, a participant in HP’s 401(k) plan, who claimed that from 2019 to 2023, the HP Plan Committee improperly used forfeited employer contributions—funds that had not vested when employees departed and were therefore left behind—to satisfy HP’s own matching obligations, rather than to offset administrative expenses. Hutchins alleged it constituted a breach of ERISA. A district court dismissed the case in 2024, and Hutchins appealed to the U.S. 9th Circuit Court of Appeals.

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In its amicus brief filed July 9, the Department of Labor pushed back on Hutchins’ argument, stating that “a fiduciary’s use of forfeited employer contributions in the manner alleged in this case, without more, would not violate ERISA.”

The brief distinguished between fiduciary responsibilities and “settlor” decisions, which relate to the design and funding of benefit plans; such functions are not subject to ERISA’s fiduciary standards. According to the DOL, “funding a plan is a settlor function,” and employers retain discretion in deciding how to cover plan expenses or provide contributions.

Previous IRS guidance also stated that plan sponsors may use forfeited funds to offset future contributions or pay down plan expenses if noted in its plan documents.

The DOL also underscored that fiduciaries must act “with the care, skill, prudence, and diligence” required by ERISA, but asserted that Hutchins’ allegations failed to show a plausible violation. Specifically, the brief stated that the HP Plan Committee’s decision to allocate forfeitures toward matching contributions was both permissible under the plan’s terms and aligned with participants’ interests, because it ensured timely delivery of promised benefits.

In earlier proceedings, the U.S. District Court for the Northern District of California had already dismissed Hutchins’ complaint twice—once with leave to amend and then a second time in February without it. The court ruled that Hutchins’ theory would, if accepted, improperly require fiduciaries to favor administrative cost reduction over benefit funding, a requirement not supported by ERISA.

The DOL echoed this view, noting that Hutchins’ claims “fail to plausibly allege that a ‘proper’ investigation would have led to a different outcome.” The brief also stated that “there is no fiduciary duty to litigate” with a plan sponsor over contribution amounts, especially when participants are receiving the benefits promised under the plan.

The ERISA Industry Committee joined the DOL in the amicus brief.

The 9th Circuit is expected to rule on the case later this year, but the DOL’s position will likely impact the court’s decision and future cases. Daniel Aronowitz, who awaits a full Senate vote to confirm him as the head of the DOL’s Employee Benefits Security Administration, has said he plans to limit ERISA litigation. ERISA experts previously told PLANSPONSOR that amicus briefs from the department are one way to pursue that goal.

The plaintiff is represented by Hayes Pawlenko LLP, and the defendants by Morgan Lewis Bockius LLP.

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