Compliance April 21, 2021

Senators Expand Retirement Benefits for Military Spouses in New Bill

The proposed legislation comes months after a Department of Defense report found that a quarter of military spouses are unemployed. 

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Lawmakers have introduced a bill that would expand access for military spouses to employer-sponsored retirement plans.  

U.S. Senators Susan Collins, R-Maine; Maggie Hassan, D-New Hampshire; James Lankford, R-Oklahoma; and Michael Bennet, D-Colorado, have presented the Military Spouses Retirement Security Act, a bipartisan bill that would help spouses of active-duty service members save for retirement by increasing their access to employer-sponsored retirement plans.

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Under the act, small employers—with 100 employees or fewer—would be eligible for a tax credit of up to $500 per year per military spouse. It would be available for three years per military spouse, and the credit amount would be equal to $200 per military spouse, plus 100% of all employer contributions for that spouse, up to $300.

To receive the credit, small employers must allow a military spouse to be immediately eligible for retirement plan participation within two months of hire. Upon plan eligibility, a military spouse “must be eligible for any matching or non-elective contribution available to a similarly situated employee with at least two years of service and must be 100% immediately vested in all employer contributions,” according to the bill.  

“Like many Americans, spouses of active-duty service members often face challenges when it comes to saving for retirement. Military spouses also face one hurdle that many others do not: frequent moves and changes in employment,” Collins says. “By encouraging small employers to provide military spouses with accelerated access to retirement plans, employer contributions and vesting, our bipartisan bill would help to strengthen the financial security of these unsung heroes of our country’s national defense.”

The coronavirus pandemic has exacerbated threats to retirement security, especially for families of active-duty service members. According to the Department of Defense, about one-third of military service members experience a permanent change of station move every year. When service members move, their spouses often relocate with them, putting their own careers on hold.  

Another DOD report found that a quarter of military spouses are unemployed—a rate roughly four times the national average of 6.3% in January. Military spouses faced other disadvantages prior to the pandemic as well—and many continue to be underemployed and earn less than they are qualified for, or earn nothing at all.

“Every assignment and deployment impacts a family, and too often, that can mean sacrificing access to retirement benefits,” Lankford says. “This legislation encourages businesses to make it easier for military spouses to participate in retirement plans and ease some of the burdens of moving every few years. This is a simple way we can honor their sacrifices, make their life of service easier and help prepare them for their retirement.”

The full text of the bill can be found here.

Compliance April 21, 2021

Senators Collins, Warner Introduce Bill to Boost Retirement Savings Plans

It is aimed at making it easier for small businesses to offer SIMPLE plans.

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Senators Susan Collins, R-Maine, and Mark Warner, D-Virginia, have introduced the SIMPLE Plan Modernization Act to provide greater flexibility and access to small businesses and their employees seeking to use the SIMPLE [savings incentive match plan for employees] plans as a retirement savings option.

“Increasing access to employer-sponsored retirement plans is one way to improve Americans’ financial security, yet approximately two out of every five Mainers in the private sector lack access to a retirement plan at work,” Collins said. “The SIMPLE Plan Modernization Act is a win-win proposition that helps small businesses enhance their employee benefits and assists workers with taking steps to save for retirement.”

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Warner added: “Even before the economic crisis caused by the COVID-19 pandemic, many Americans were having trouble saving for retirement. Now, there are even more financial challenges facing our workforce. That’s why I’m proud to introduce this bipartisan legislation to make it easier for small business owners to support their employees in securing their financial future.”

Congress established SIMPLE retirement plans through the Small Business Job Protection Act of 1996 to encourage small businesses to provide their employees with retirement plans. Retirement plans among small employers continue to be scarcer than among medium and large employers, the senators note, adding that traditional 401(k) plans are more expensive to administer.

SIMPLE retirement savings accounts are available to businesses with 100 or fewer employees, as long as they do not have another employer-sponsored retirement plan.

The proposed legislation would increase the contribution limit for SIMPLE plans from $13,500 to $16,500 for employers with up to 25 employees to encourage more small businesses to offer these plans and to allow employees to save more each year on a tax-deferred basis. It would also increase the catch-up limit for companies with fewer than 25 employees from $3,000 to $4,750.

For companies with 26 to 100 employees, the legislation would give them the option of the higher contribution limits and—to encourage them to transition to 401(k)s—increase their SIMPLE plan mandatory employer contribution requirements by 1 percentage point if they elect the higher limits.

The bill would also allow for a reasonable transition period for employers that grow beyond 25 employees and make the limit increases unavailable if the employer has had another defined contribution (DC) plan within the past three years. This is meant to encourage businesses that already have qualified plans to retain them.

It would also modernize SIMPLE plan form filing requirements and modify the transition rules from SIMPLE plans to traditional plans to facilitate and encourage such transitions.

Finally, it would direct the Department of the Treasury to study the use of SIMPLE plans and report findings to Congress, along with any recommendations.

Collins and Warner have previously introduced similar legislation.

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