Senators Susan Collins, R-Maine, chair of the Aging Committee, and Mark Warner, D-Virginia, have introduced the SIMPLE Plan Modernization Act to provide greater access to SIMPLE plans among small businesses.
It would permit businesses of 100 or fewer employees to create SIMPLE savings accounts for their employees, as long as the employer does not sponsor another retirement plan. It would also increase the contribution limit for SIMPLE plans from $12,500 to $16,000 for the smallest businesses (those with one to 25 employees), with a corresponding increase in the catch-up limit from $3,000 to $4,500.
Businesses with 26 to 100 employees would have the option of adopting the higher contribution limits and increase their SIMPLE plan mandatory employer contribution requirements by one percentage point.
It would also modernize SIMPLE plan form filing requirements and modify the transition rules from SIMPLE plans to traditional plans in order to encourage such transitions. It would also direct the Department of the Treasury to study the use of SIMPLE plans and submit a report on the subject to Congress.
“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,” Collins said. “The SIMPLE Plan Modernization Act is a win-win for retirement security, encouraging small business owners and their employees to take steps to save for retirement.”
Warner added: “The changing nature of work has made it more challenging for many Americans to plan for their retirement. This commonsense legislation will make it easier for small businesses to support their workforce in saving for retirement.”
Congress first established SIMPLE (Savings Incentive Match Plan for Employees) retirement plans in the Small Business Job Protection Act of 1996. These plans are less expensive to administer than traditional 401(k)s.