House Ways and Means Committee Chairman Richard Neal (D-Mass.) told a crowded hearing room on Wednesday that he plans to advance legislation that would make it easier for businesses, especially smaller businesses, to offer retirement plans.
One bill Neal touted is the wide-sweeping Retirement Enhancement and Savings Act (RESA), which would make it much easier for small employers to band together to enjoy cost savings in order to offer a multiemployer retirement plan (MEP) to employees.
“Unfortunately, Americans are currently facing a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty,” said Neal at his first hearing on retirement security since taking over the committee’s gavel.
The insurance industry and other policy advocates underscored the importance of the long-awaited retirement legislation.
“It’s time to make RESA a reality,” MassMutual CEO Roger Crandall told Neal at the hearing. The open architecture of MEPS “would permit unrelated employers to join together under a single retirement plan to harness new economies of scale and reduce unnecessary administrative burdens on employers.”
Without RESA, “the barrier to expanded access to workplace retirement plans unfortunately persists despite bipartisan support for open MEPs in both houses of Congress and support across Democratic and Republican administrations in the White House,” Crandall added.
The RESA legislation, which has no major opposition or costs, has been touted by supporters as doing the following:
• Expand access to retirement plans for both employers and workers using all the techniques, including auto-enrollment, that work for larger employers.
• Allow for critical cost-sharing and savings for employers that set up plans.
• Encourage participation and education.
• Make it easier for employees to create lifetime income.
• Repeals the prohibition on IRA contributions for employees still working at age 70½.
The idea behind MEPs is to allow multiple employers to pool assets and buying power to create economies of scale, while clearing away administrative and legal hurdles.
One hurdle that stops small employers from creating or joing a multiemployer plan is called the “Nexus Provision,” which requires that employers be connected in some way through business affiliations or business interests such as their trade association.