Federal funding package included legislation to boost access to SIMPLE retirement savings plans


Among the many provisions signed into law as part of the recent federal government funding package was legislation from U.S. Sens. Susan Collins (R-ME) and Mark Warner (D-VA) that will increase access to employer-sponsored retirement plans.

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These plans, also known as Savings Incentive Match Plan for Employees (SIMPLE), were originally created in 1996 to encourage small businesses to provide retirement plans for employees. Retirement options for smaller businesses tend to be harder to come by than for larger employers due to the expense of administering them. Creation of SIMPLE retirement savings accounts can be created so long as businesses have 100 or fewer employees and provide no other employer-sponsored retirement plan. 

“Increasing access to employer-sponsored retirement plans is one way to improve Americans’ financial security, yet approximately two out of every five Mainers in the private sector lack access to a retirement plan at work,” Collins said. “The SIMPLE Plan Modernization Act is a win-win proposition that helps small businesses enhance their employee benefits and assists workers with taking steps to save for retirement.”

The inclusion of the SIMPLE Plan Modernization Act in the funding omnibus will tackle the issue from several angles, including:

  1. Raising contribution and catch-up limits for SIMPLE plans by 10 percent for businesses of 1-25 employees
  2. Higher contribution limit options for businesses of 26-100 employees and increased mandatory employer contribution requirements of 1 percentage point if higher limits are selected
  3. Reasonable transition period for employers that grow beyond 25 employees
  4. Eliminating limit increases if employers have had another plan within the past three years
  5. Ordering the Treasury Department to study and report to Congress on the use of SIMPLE plans

In theory, these efforts will encourage small businesses to offer retirement savings in general and allow their employees to save more annually on a tax-deferred basis. 

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