Retirement Security Act Introduced in Congress

Legislation has been introduced that would increase the cap on deferrals and matching contributions for safe harbor plans.

U.S. Senator Susan M. Collins (R-Maine) has introduced the Retirement Security Act of 2015 (S. 266).

The bill provides that a qualified multiple employer retirement plan shall not fail to be treated as an employee pension benefit plan or pension plan solely because the employers sponsoring the plan share no common interest. 

According to a statement on Collins’ website, under current law, one business’ failure to meet the minimum criteria necessary to maintain a tax-preferred retirement plan can endanger benefits for all multiple employer plan participants. The bill would direct the Treasury Department to issue regulations to address this issue. The bill also directs the Treasury Department to simplify, clarify and consolidate notice requirements for plans.

The legislation modifies the automatic enrollment provisions for safe harbor plans by offering an alternative method for meeting nondiscrimination requirements. Current law effectively caps employee contributions at 10% of annual pay, with the employer contributing a matching amount on up to 6%. The bill would create an additional safe harbor that would allow employees to receive an employer match on contributions of up to 10% of their pay. Employees would be able to contribute more than 10%, albeit without an employer match. The bill helps the smallest businesses—those with less than 100 employees—offset the cost of the additional match by providing a new tax credit equal to the increased match.

The legislation also directs the Treasury Department to modify Form 1040 EZ to allow taxpayers to claim the Saver’s Credit on that form.

Text of the bill is here.