Rep. Neal Introduces Multifaceted Bill Aimed at Strengthening Retirement Savings
Rep. Richard Neal (D-Mass.) introduced legislation May 22 to increase retirement savings by offering employers a safe harbor for automatic salary deferrals starting at no less than 6 percent of salary, instead of a minimum 3 percent of salary under current automatic enrollment safe harbor policy.
The 6 percent safe harbor would be an additional safe harbor option for employers and would not replace the existing 3 percent safe harbor, which would continue to be an option for employers that elect to use it, according to a bill summary. The Retirement Plan Simplification and Enhancement Act (H.R. 2117) also would amend the current 3 percent safe harbor by removing its 10 percent cap on salary deferrals.
Neal’s automatic enrollment safe harbor proposal would require a minimum deferral of 6 percent of salary in the first year of enrollment, 8 percent in the second year, and 10 percent in the third year and all subsequent years. Employers that sponsor plans subject to the safe harbor would be required to make matching contributions equal to 50 cents on the dollar for the first 2 percent of a participant’s pay and 30 cents on the dollar for the next 8 percent of pay.
Employers with 100 or fewer employees that adopt the safe harbor would receive a tax credit for the first three full years that the safe harbor is in effect.
Employers that adopt the new safe harbor would be exempt from nondiscrimination and “top heavy” testing, as they are under the current automatic enrollment safe harbor.
Texts of H.R. 2117 and a bill summary are in TaxCore.