Congressman Darin LaHood introduced bipartisan legislation to expand access to retirement savings for more Americans. Retirement plans are complicated for small businesses with fewer than 50 employees, and only half of those businesses offer any such policies. The Starter-K Act legislation establishes starter retirement plans that allow small and newly formed companies to form retirement plans with streamlined regulations and lower costs. These plans result in more access to effortless retirement savings, and participating small businesses will see their employees automatically enrolled, which means straightforward retirement savings of up to $6,000 per year.
“In Illinois and throughout America, small businesses are the biggest employers, and they should be able to provide their workers with better options to save for retirement,” said Congressman Darin LaHood. “Our bipartisan legislation will remove unnecessary, complex regulations to allow more small businesses to offer retirement plans and help more Americans secure their financial future.”
The Act creates “starter” defined contribution plans (DC) under Sections 401(k) and 403(b). The starter DC plans streamline regulations by granting employers a safe harbor for the nondiscrimination and top-heavy testing requirements for defined contribution plans. Under the Act, employers have no precondition to providing matching contributions, meaning lower costs for small businesses and start-ups. If employers are eligible, they must not currently offer a plan. $6,000, indexed to inflation, is the limited annual contribution (with an additional catch-up contribution for those at least age 50). Automatically enrolled eligible employees have their contributions aligned with the minimum default level of 3% of pay. The Act also directs the Department of Labor to provide simplified reporting for the plans.