Bills introduced to boost small-business retirement plan offerings

Two bills aimed at making it easier for small businesses to offer retirement plans have been introduced in the Senate.

Sens. John Hickenlooper, D-Colo., and Susan Collins, R-Maine, introduced the Simplifying Small Business Retirement Savings Act, which would expand the marketplace for pooled employer plans, or PEPs. The bill, introduced May 5, would allow companies administering PEPs to have the option of using discretionary trustees — trustees named in a plan document that have “exclusive authority and discretion over the management and control of plan assets” under the Employee Retirement Income Security Act — or directed trustees, who are subject to the direction of a named fiduciary who is not a trustee.

Currently, companies administering PEPs, can use only discretionary trustees. PEPs, which were established under the Setting Every Community Up for Retirement Enhancement Act, or SECURE Act, that was signed into law in 2019, give employers in unrelated businesses the opportunity to combine their 401(k) plans into a single pooled plan, a move meant to lower plan costs and reduce sponsors’ administrative and fiduciary responsibilities.

Moreover, the bill would simplify groups’ IRS filings by subjecting any retirement plan pool that is made up of businesses each with 100 employers or fewer to simplified IRS compliance requirements.

Sen. Hickenlooper on May 5 also introduced the Incentivizing Small Business Retirement Savings Act, which would provide small business with a tax credit for the contributions they make to a retirement plan on behalf of workers for the first five years they are made. The tax credit of up to $1,000 per employee would apply to businesses with 50 or fewer employees and phase out gradually for those with 50 to 100 employees.

“Small businesses don’t have the resources of big companies, yet we treat them the same when it comes to retirement plans,” Mr. Hickenlooper said in a news release. “Cutting this red tape will make it easier for employees to save for retirement and help level the playing field for local businesses.”