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House and Senate working on bills to make it easier for small businesses to offer retirement plans

Ted Knutson writes at Financial Advisors that the House and Senate are working on bills to make it easier for small businesses to offer 401(k) plans. He writes:

Bills making it easier for small businesses to offer 401(k)s by cutting costs and red tape are advancing in the Senate and the House this week. The Senate Finance Committee passed the Retirement Savings and Enhancement Act on Wednesday, while the House Education and the Workforce Committee is scheduled to take the first step to pass similar legislation Thursday.

Finance Committee member Sen. Sherrod Brown, D-Ohio, said the Senate bill has the potential to dramatically increase the number of workers with payroll retirement savings plans by easing the way for small employers to join together to take advantage of economies of scale in workplace 401(k)s—the so-called open multiple-employer plans (Open MEPs). Making it easier for small employers to offer retirement savings is important because only 20 percent of workers at companies with under 500 employees are in job-based retirement plans, while the number is four times greater for businesses with over 500 workers, noted Virginia Democrat Sen. Mark Warner, D-Va., who serves with Brown on the Senate finance and banking committees.

House Financial Services Committee looks to repeal DOL new fiduciary rules

House Financial Services Committee Chairman Jeb Hensarling (TX-R) introduced a bill late last week that contains provisions to repeal the Department of Labor’s new fiduciary rules. The bill is called the Financial CHOICE Act, HR 5983, and it will:

End taxpayer-funded bailouts of large financial institutions; relieve banks that elect to be strongly capitalized from growth-strangling regulation that slows the economy and harms consumers; impose tougher penalties on those who commit financial fraud; and demand greater accountability from Washington regulators.

New regulations help Americans save for retirement via state plans

David John of AARP—and past speaker at a number of Savings and Retirement luncheons—describes how new Department of Labor regulations make it easier for people to save for retirement through state plans. He writes:

The final regulations offer states that choose to establish automatic enrollment savings plans that are not covered by the Employee Retirement Income Security Act (ERISA) flexibility in the way they administer and regulate the plans. Several states have taken this approach because they believe ERISA imposes greater costs and regulatory responsibilities on employers. While the plans must be established under state law, boards or commissions may set the details of plan design, and operations may be contracted out to private sector vendors.  However, states must take responsibility for the security of payroll deductions by establishing procedures to ensure that the contributions go to the accounts within a reasonable time period.

The state-sponsored plans may use automatic enrollment if the state requires employers to offer the plan or an equivalent private sector option and the role of the employer is limited to providing information and collecting deductions. Under automatic enrollment, participation is completely voluntary, but an employee is part of the plan, contributing a pre-set amount to a certain investment choice unless the worker decides otherwise. States must set out a consumer’s rights and establish a mechanism to enforce them.