Compliance November 16, 2023

New Senate Bill Would Prevent Retirement Plans from Omitting Workers Aged 18-20

Many plans start participation at age 21; new legislation would require inclusion of anyone 18 or older.

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The Helping Young Americans Save for Retirement Act was proposed in the Senate Wednesday, aiming to increase retirement plan participation for those aged 18 to 20.

Senators Bill Cassidy, R-Louisiana, and Tim Kaine, D-Virginia, introduced the bill to the Senate Health, Education, Labor and Pensions Committee. The bill would replace 21 with 18 as the minimum age for retirement plan inclusion for plans governed by the Employee Retirement Income Security Act.

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Michael Kreps, a principal in Groom Law Group and a former senior counsel for the Senate HELP Committee, says that “ERISA and the [Internal Revenue] Code allow a plan sponsor to exclude employees that are under 21.” He adds that this “is not required, but it is permissible. The justification for that rule is that plans are really designed for longer-term employees, and young employees are often in temporary or short-term positions.”

Since the bill would replace 21 with 18 for this purpose, plans could still include workers younger than 18. The plan sponsors just would not be able to exclude those between 18 and 20 solely because of age. The bill does not modify other length-of-service requirements that can be set by the sponsors.

Since adding many young workers all at once could force some smaller plans to have to file mandatory audits, the bill comes with a five-year buffer. Any plan that admits workers aged 18 to 20 to their plan as a consequence of the bill would not have to count those new participants toward the audit threshold until five years have passed from the date that the first new 18, 19, or 20-year old was added to the plan.

Kreps explains that the bill would add “more participants to plans, which could result in some plans crossing the audit threshold.” Because of the five-year grace period “if you don’t need an audit under current law, you won’t need one if this bill passes.”

The Senate HELP Committee has not yet outlined a timetable to advance the bill.

Compliance November 16, 2023

Biden Expected to Sign Continuing Resolution

The resolution would prevent a government shutdown and keep the DOL funded through February 2.

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The Senate passed a continuing resolution Wednesday night that would keep some government departments open through January 19 and others through February 2. The CR was passed by the House on Tuesday night, and President Joe Biden is expected to sign it before the deadline Friday night at 11:59 p.m.

The CR would fund the departments of Transportation, Housing and Urban Development, Veteran’s Affairs, Energy, and Agriculture through January 19. The remaining departments, including the Department of Labor, would be funded through February 2.

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The CR funds the government at current levels for 2023 and allows federal operations to continue normal functions and scheduled projects. This includes regulatory rulemaking such as the fiduciary adviser proposal, the comment period for which expires on January 2.

The House has postponed proceedings on the budget bill for the Departments of Labor, Education and Health and Human Services; though it is considered likely to pass the House. The bill in its current form would block the DOL’s fiduciary adviser proposal, independent contractor proposal, and final rule on environmental, social and governance considerations in retirement plans and proxy voting.

The bill would also fund DOL, including the Employee Benefit Administration, at levels significantly less than the Senate’s version of the same bill and less than the budget deal struck in May between Biden and former House Speaker Kevin McCarthy, R-California.

The White House has already announced its intention to veto this House appropriations bill, which is unlikely to pass the Senate in its current form.

Overall, the House has passed seven of the 12 annual appropriations bills that fund the government for a full fiscal year. The Senate has passed three.

The House has recessed for the Thanksgiving holiday. Members are expected to resume work in Washington November 28. The Senate is scheduled to be out of Washington next week for Thanksgiving and a “state work period,” November 20 to November 24.

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