A bipartisan bill that would permit small employers use plan assets to pay expenses associated with 401(k) plan design changes has been introduced in the Senate.
Under the Increasing Small Business Retirement Choices Act, introduced Tuesday by Sen. Jacky Rosen, D-Nev., and Tim Scott, R-S.C., employers who offer 401(k) plans would no longer have to pay out-of-pocket administrative costs when making a plan design change, like auto-enrollment or auto-escalation.
The bill would amend the Employee Retirement Income Security Act of 1974 to allow small business employers to use retirement plan funds to reimburse expenses associated with plan design changes.
"Small employers need additional resources to improve their retirement plan design," the bill states. It cites a 2021 Plan Sponsor Council of America survey that found 30.5% of employers with fewer than 50 workers have an automatic enrollment feature in their retirement plan, compared to more than 77% of employers with more than 1,000 workers.
"This bipartisan legislation will ensure small business workers have access to high-quality retirement plan benefits without facing a cost barrier," Ms. Rosen said in a news release. "Removing this bureaucratic red tape and additional cost will make small businesses stronger and provide their workers with the best and most comprehensive retirement plans possible."
The bill will "lighten the burden on workers at small businesses that do not always benefit from the same features of retirement plans under larger companies," added Mr. Scott, ranking member on the Senate Special Committee on Aging, in the news release. "Leveling the playing field to maximize benefits for the financial futures of all Americans should be a goal we can all get behind."
Brian Graff, CEO of the American Retirement Association, endorsed the bill and in the same news release said plan design features such as automatic enrollment and financial wellness programs have been shown to have a major impact on American workers' financial health and retirement security. "The expanded flexibility to cover the expenses associated with these programs means that more employers — and most particularly small business owners — will now be able to bring those advantages to even more workers," Mr. Graff said.
