New bill increases opportunities for employers, especially small businesses, to offer retirement plans to workers.
Earlier this month, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law. The bill, sponsored by Rep. Richard Neal (D-MA), amends the Internal Revenue Code to revise requirements for multiple employer pension plans and pooled employer plans. Highlights of the legislation include expanded benefits for older workers, new parents, and part-time employees. SECURE provides that failure of one employer in a multiple employer retirement plan to meet requirements will not cause all plans to fail. It also establishes pooled employer plans that don’t require common characteristics; and it increases the cap for automatic contributions to pension plans from 10% to 15% of employee compensation.
More specifically, the bill:
- Increases the tax credit for small employer pension plan startup costs.
- Creates a new three-year tax credit for small employers for startup costs for new pension plans that include automatic enrollment.
- Treats stipends and non-tuition fellowships as compensation for purposes of the retirement savings tax deduction.
- Repeals the prohibition on contributions to a traditional Individual Retirement Account (IRA) by an individual who has reached age 70-1/2.
- Prohibits the distribution of plan loans through credit cards or similar arrangements.
- Allows benefits for certain long-term employees who work at least 500 hours in 3 consecutive 12-month periods and have reached age 21.
- Permits penalty-free withdrawals from retirement plans for expenses related to the birth of a child or adoption.
- Treats difficulty of care payments to healthcare workers as earned income for retirement plan purposes.
- Allows employers to treat retirement plans adopted before the due date of the tax return as adopted as of the last day of the taxable year.
The bill received the support of employer organizations such as the Society for Human Resource Management (SHRM), which says SECURE incentivizes small businesses to set up employer-sponsored retirement plans. “There is no better way to prepare Americans for retirement than supporting and strengthening employer-sponsored plans,” said Emily M. Dickens, SHRM chief of staff.