WASHINGTON – Today, Senate Special Committee on Aging Chairman Herb Kohl, D-Wis., announced plans to introduce bipartisan legislation that would make it easier for small business owners to set up retirement plans. The announcement came during a Senate Special Committee on Aging hearing that examined ways to overcome the barriers that face small businesses that want to offer retirement plans to employees.
“Under our approach, which is supported by the U.S. Chamber of Commerce, small businesses would be able to pool together to create plans that use experienced financial experts to assume many of the administrative and fiduciary duties that small business owners have neither the time nor expertise to monitor,” Kohl said during the hearing. “This would result in reduced costs and provide a needed incentive for the wider availability of retirement plans being offered to small businesses. And ultimately, this would result in more people saving for their retirement.”
According to Census estimates, just 29 percent of workers employed by businesses with less than 100 employees have access to employer-sponsored retirement plans. By comparison, 81 percent of workers at companies with 100 or more employees have access to employer-sponsored plans.
Kohl is working on the legislation with Sen. Mike Enzi, R-Wyo. and other senators in the hopes of introducing the bill in the coming months.
The legislation, which would be introduced in the coming months, would allow small businesses to pool their resources and assets together into multiple employer plans (MEP). And, while the employer would maintain some limited fiduciary liability for decisions related to plan selection and plan fees, the bill would also allow third-party financial experts to be hired to assume certain fiduciary responsibilities in addition to relieving employers of administrative duties.
Current law makes it difficult for unrelated businesses to pool their resources together to create retirement plans. The bill would direct the Department of Treasury to resolve the “one bad apple” rule that currently results in a disqualification of the entire MEP if one employer fails to satisfy all qualification requirements. The legislation would also direct the Department of Labor to establish a standardized plan in order to further reduce administrative costs as well as the costs for small businesses to switch between plans.
Today’s hearing included testimony from Charles Jeszeck, Director of Education, Workforce and Income Security at the Government Accountability Office (GAO) who detailed the findings of the new GAO report, “Better Agency Coordination Could Help Small Employers Address Challenges to Plan Sponsorship.”
The hearing also included testimony from Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis Borzi who discussed the agency’s outreach efforts to inform small businesses and accountants about retirement plans. Her testimony can be found here.
Also testifying was Robert W. Baird and Company Senior Vice President and Senior Investment Consultant Bryan Fiene of Madison, Wis., who provided a firsthand account of the challenges small business owners face in trying to offer retirement plans. His testimony can be found here.
John J. Kalamarides, Senior Vice President, Institutional Investment Solutions, Prudential Retirement, of Hartford, Conn., also testified about the benefits for employees, employers and plan providers of easing restrictions to allow small businesses to pool their assets together in a multiple employer plan. His testimony can be found here, and his report on using MEPs to close the retirement coverage gap can be found here.