Bipartisan legislation allowing small businesses to more easily access SIMPLE retirement savings accounts for their employees was reintroduced Monday by Sens. Susan Collins, R-Maine, and Mark Warner, D-Va.
SIMPLE (Savings Incentive Match Plan for Employees) retirement plans were created in 1996 as a lower-cost alternative to traditional 401(k) accounts. The legislation would permit employers with 100 or fewer employees to create SIMPLE savings accounts if they do not sponsor another retirement plan and increase the contribution limit to $16,000 from the current $12,500 for employers with 25 or fewer employees. Those with 26 to 100 employees could adopt the higher contribution limits, with some limits.
The legislation is also aimed at encouraging employers to transition to 401(k) plans by simplifying the transition rules and transition periods, and calls on the Treasury Department to report to Congress on the use of SIMPLE plans.
The senators had introduced the SIMPLE Plan Modernization Act in July. It was referred to the Senate Finance Committee of which Mr. Warner is a member, but there was no further action.
Ms. Collins, who chairs the Senate Special Committee on Aging, said in a statement that the legislative proposal was spurred by concerns raised by financial advisers that "neither employees nor their employers are in a good position to save for retirement." Mr. Warner said in the same statement that the need for such plans is greater given the changing nature of work.
At an Aging Committee hearing Wednesday on ways to promote retirement security, John Scott, director of the Pew Charitable Trusts' Retirement Savings Project, said many small-business owners are not familiar with plan options designed for them and are discouraged by a perceived high cost of starting plans. "Policy initiatives that reduce plan startup costs and improving awareness of SIMPLE and (Simplified Employee Pension) plans could be useful in encouraging new plans," Mr. Scott told the committee.