The proposed bill — called the Expanding Access to Retirement Savings for Caregivers Act — would allow individuals who took time away from the workforce to care for a family member to start making catch-up contributions earlier than they otherwise would once they return to work. For example, someone taking seven years to care for their children would be able to start making catch-up contributions at age 43 instead of having to wait to age 50, said Kent Mason, a partner at Davis & Harman LLP in Washington.
"The normal catch-up kicks in earlier," Mr. Mason said, explaining that the bill reduces the age 50 trigger by one year for each full year of a caregiver's aggregate qualified unemployment periods.
To qualify, caregivers must not have earned income while providing care to dependents living with them. The bill also requires that caregiving be for an uninterrupted period of at least one year and begin after the caregiver attains age 18.
In addition, the bill requires caregivers to submit a declaration of their qualified unemployment periods to the Internal Revenue Service under penalty of perjury, Mr. Mason said.
The legislation applies to 401(k) plans and other defined contribution plans as well as individual retirement accounts. The cap on catch-up contributions to 401(k) accounts is $6,500 annually, the same as it is for regular catch-up contributions.
The American Benefits Council, a national trade group that lobbies for employer-sponsored benefit plans, supports the bill. "Let a thousand flowers bloom," said Lynn Dudley, senior vice president of global retirement and compensation policy at the American Benefits Council in Washington. "There is no reason why we shouldn't look for every solution to bring everyone into the retirement system so that they can have a dignified retirement."
Ms. Dudley says the council views the bill favorably because it allows more people to save and supports the organization's goal of "improving the financial security of everyone."
Joy Napier-Joyce, an attorney at Jackson Lewis PC in Baltimore, also said plan sponsors want to encourage retirement savings, even though not all of them are aware of the bill given the recent enactment of two new retirement laws — namely the CARES Act and SECURE Act — that have required their full attention.
"I think employers generally are eager to flip the switch and institute changes to the plan that will be employee-friendly but they don't want to create something that creates an administrative headache," she said.
Indeed, the likelihood of greater administrative duties that is certain to come from keeping track of caregivers' catch-up contributions is a concern for plan sponsors but not one that is impossible to overcome, Ms. Dudley said.
"We can work with policymakers to make that a smooth experience," she said, adding that plan sponsors will need guidance on "all kinds of little stuff," such as where to put the money if the caregiver doesn't designate an investment and how it should be reported on the Form 5500.
"You just have to walk through every step of the way," she said.
Still, plan sponsors think it's a good idea. Even if "somebody's got to track it, somebody's got to set it up and somebody's got to pay for it," sponsors would still support this bill, Ms. Dudley said.
Service providers, too, support the legislation, and the Investment Retirement Institute, a trade association for money managers and other financial services firms, is an advocate. IRI supported the bill when it was first introduced and continues to support it, said Paul Richman, IRI's chief government and political affairs officer in Washington.
"It's still a top agenda priority," Mr. Richman said.
