The SIMPLE Plan Modernization Act has been introduced by Senators Susan Collins (R-Maine) and Mark Warner (D-Virginia) to provide greater flexibility and access to small business employers and employees seeking to use SIMPLE plans to save for retirement. The Savings Incentive Match Plan (SIMPLE) retirement plans were first introduced by Congress for businesses with 100 or fewer employees in the Small Business Job Protection Act of 1996.The new law would raise the contribution limit for SIMPLE plans from $12,500 to $15,500 for the smallest businesses (those with one to 25 employees) along with an increase in the catch-up limit from $3,000 to $4,500.
It would give businesses with 26 to 100 employees the option of the higher limits. Should they move to the higher limits, it would increase their SIMPLE plan mandatory employer contribution requirements by one percentage point.
It would allow for a reasonable transition period for employers who hire more than 25 employees. It would also make the limit increases unavailable if the employer has had another defined contribution plan in the past three years.
It would modernize the SIMPLE plan form filing requirements and modify the transition rules from SIMPLE plans to traditional plans to facilitate and encourage such transactions.
Finally, it would direct Congress to study the use of SIMPLE plans and report to Congress on such use, along with any recommendations.
“In my home state, the vast majority of businesses are eligible to sign their employees up for SIMPLE plans,” Collins says. “Financial advisers from Presque Isle to Portland have shared their concerns that neither employees nor their employers are in a good position to save for retirement. We must give small businesses and employees a better opportunity to save for retirement, and this legislation will provide such an opportunity.”