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.