Setting Every Community Up for Retirement Enhancement Act of 2019: Title I -- Expanding and Preserving Retirement Savings
June 6, 2019
The Senate Finance Committee has introduced a new version of this act, being the most comprehensive retirement reform proposal in nearly a decade. The Act contains many measures popular among retirement industry professionals, analysts, and other stakeholders. For example, RESA allows for an increase in access to lifetime income products in defined contribution plans and allows small employers/business owners to come together to facilitate larger, more cost-efficient, collective retirement plans.
The House version was just amended recently with additional provisions to create a new measure, the Setting Every Community Up for Retirement Enhancement Act of 2019 or “SECURE Act.” The SECURE Act is scheduled for a House committee vote in the coming days. The provisions include four titles with at least two sections in each title.
Under “Title I: Expanding and Preserving Retirement Savings” there are several key modifications including: section 101 - Expand Retirement Savings by Increasing the Auto Enrollment Safe Harbor Cap, section 104 - Small Employer Automatic Enrollment Credit, and Section 111 - Allowing Long-term Part-time Workers to Participate in 401(k) Plans.
Section 101. Expand Retirement Savings by Increasing the Auto Enrollment Safe Harbor Cap:
The legislation increases the cap from 10 to 15% of employee pay that required automatic escalation of employee deferrals going no higher than under an automatic enrollment safe harbor plan.
Section 104. Small Employer Automatic Enrollment Credit:
Automatic enrollment has shown increases in employee participation and higher retirement savings. The legislation creates a new tax credit of up to $500 per year to employers. The credit will allow the employers to defray startup costs for new 401(k) plans and SIMPLE IRA plans that include automatic enrollment. The credit is in addition to the plan start-up credit allowed under present law and is available for three years. This credit would also be available to employers that are willing to convert an existing plan to an automatic enrollment design.
Section 111. Allowing Long-term Part-time Workers to Participate in 401(k) Plans:
Under current law, employers generally may exclude part-time employees (employees who work less than 1,000 hours per year) when providing a defined contribution plan to their employees. The bill will require employers maintaining a 401(k) plan to have a dual eligibility requirement under which an employee must complete either a one year of service requirement or three consecutive years of service where the employee completes at least 500 hours of service (except in the case of collectively bargained plans).