March 30, 2022
WASHINGTON, D.C. – Today, U.S. Senators John Barrasso (R-WY) and Tom Carper (D-DE) introduced bipartisan legislation to expand access to retirement savings for more Americans.
Only half of small businesses with fewer than 50 employees currently provide a retirement plan for their employees. The Starter-K Act of 2022 creates starter retirement plans that streamline regulations and lower costs for small businesses and start-ups, resulting in more access to easy retirement savings. Employees of participating small businesses are automatically enrolled, meaning easier retirement savings up to $6,000 per year.
“Small businesses are the biggest employers in so many communities in Wyoming and around the country. They deserve the opportunity to provide their employees with better options to save more for retirement,” said Senator Barrasso. “Our bipartisan bill ensures that small businesses can access streamlined plans without complex regulations. This will help more hard-working Americans save money and achieve a more secure financial future.”
“Small businesses are the backbone of our economy, providing millions of jobs for Americans nationwide. But far too often, businesses cannot afford to provide their workers with retirement plans, leaving many Americans without a sound financial future,” said Senator Carper. “I’m proud to cosponsor this legislation that would make it simpler and more cost effective for small businesses to provide workers with employer-sponsored retirement plans. I look forward to working with Senator Barrasso on this important issue to help more Americans save for retirement and achieve more secure financial futures.”
“The nation’s retirement savings gap is almost exclusively found among small businesses, many of which cite administrative concerns and cost as primary reasons they don’t offer currently access to a retirement savings plan at work,” said Brian Graff, CEO of the American Retirement Association. “As they look to meet the challenges of the ‘Great Resignation,’ the ‘Starter K’ provides both a simplified structure and real tax incentives for hundreds of thousands of small businesses to provide for the first time this option to their workforce. We enthusiastically support this legislation, and the opportunity it presents for millions of hard-working Americans.”
The Starter-K Act of 2022 creates “starter” defined contribution plans (DC) under Sections 401(k) and 403(b).
- These starter DC plans 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.
- 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).
- Eligible employees are automatically enrolled at the minimum default level of 3% of pay.
- Directs the Department of Labor (DOL) to provide simplified reporting for the plans.