Bipartisan ‘Starter-K’ Retirement Bill Introduced in the House

The bill directs the Department of Labor to provide simplified reporting for the plans
Starter-K Retirement Bill
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Congresswoman Linda Sánchez, D-Calif. and Congressman Darin LaHood, R-Ill., introduced the Starter-K Act, bipartisan legislation they say, “will expand access to retirement savings for more Americans.”

“Annual contributions would be limited to $6,000, indexed to inflation.”

The House bill is similar to legislation introduced in the Senate by Senators John Barrasso, R-Wy, and Tom Carper, D-Del. 

The Starter-K Act supposedly creates starter retirement plans that streamline regulations and lower costs for small businesses and start-ups, “resulting in more access to, and coverage for, retirement savings.”

In the bill, employees of participating small businesses are automatically enrolled in plans with contribution limits up to $6,000 per year. 

The representatives note that only half of small businesses with fewer than 50 employees currently provide a retirement plan for their employees.

“Small businesses fuel our economy and allow our communities to thrive,” Sánchez said in a statement. “Unfortunately, the hard-working Americans who keep our small businesses running are often left with few options to save for retirement. This legislation will help small business owners provide their employees with streamlined, cost-effective retirement plans, ensuring more Americans can retire with financial peace of mind.” 

“In Illinois and throughout America, small businesses are the biggest employers, and they should be able to provide their workers with better options to save for retirement,” LaHood added. “Our bipartisan legislation will remove unnecessary, complex regulations to allow more small businesses to offer retirement plans and help more Americans secure their financial future.” 

The Starter-K Act and similar 403b version would streamline regulations by providing employers a safe-harbor for the nondiscrimination and top-heavy testing requirements for defined contribution plans. 

Employers are not required to provide matching contributions, meaning lower costs for small businesses and start-ups, and eligible employers are those who do not currently offer a plan. 

Annual contributions would be limited to $6,000, indexed to inflation (with an additional catch-up contribution for those at least age 50), and eligible employees are automatically enrolled at the minimum default level of 3% of pay. 

The bill further directs the Department of Labor (DOL) to provide simplified reporting for the plans. 

John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

2 comments
  1. There is absolutely no reason for this. It just puts more burden on small business owners. Sanchez wants to blame small businesses for the fact that people do not save. (Also, it is a bit ironic that these congresspeople come from a state with serious financial problems). Everyone already has access to an IRA or Roth. It is not about ACCESS, it is about SAVING. We need to stop telling people that retirement is created by government programs or employer plans. In my opinion, no employer should have a plan unless they provide some sort of match. The only thing that helps is matching not mandates. It is really quite simple, stay out of debt and save, save, save. That is how you retire.

  2. I mostly agree with Wyatt Moerdyk. There is not a good reason to add yet another type of employer plan when the SIMPLE IRA exists especially for smaller employers. While employees are far more likely to participate thru payroll deduction compared to private IRA contributions, the SIMPLE could easily be expanded by offering ROTH options, relaxing or eliminating required employer match or additionally allowing higher levels of employer matching for greater flexibility. The SIMPLE already allows employees a much higher contribution limit than this proposal that merely duplicates a personal IRA’s contribution limits.

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