A key financial services lobbying group is calling for clarification and minor tweaks of a new retirement law to make it easier for employers who participate in pooled plans.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act includes tax breaks that reward employers for offering work-sponsored retirement plans and give account holders more time to grow their retirement savings.
Plan sponsors and practitioners are counting on government regulators to explain how the myriad changes woven into the SECURE Act are expected to work. Many of the changes took effect Jan. 1.
The Insured Retirement Institute worked hard at getting the measure signed into law and is well known on Capitol Hill and at the Labor Department. The group’s requests show policymakers how a few small changes in new law could make it work more efficiently in the industry.
The IRI’s proposed modifications include:
- Extended tax breaks for start-up plans: Employers who create new retirement plans are eligible for $500 in annual tax credits for up to three years under the SECURE Act. The IRI wants that clarified so employers who participate in pooled retirement plans can claim the tax benefit when they launch their program, rather than when the pooled plan started.
- Pooled retirement plans for non-profits: The SECURE Act allows unrelated businesses to pool their resources to start 401(k) plans. Non-profits, such as church groups, don’t qualify because they are covered by 403(b) plans. The IRI wants lawmakers to expand the pooled retirement plan option to include “nonprofits, public educational organizations, and religious institutions.”
- Insurance companies can run pooled retirement plans: The DOL’s association retirement plan proposal bars financial products providers such as banks, insurance companies, and broker-dealers from sponsoring pooled retirement plans due to potential conflicts of interests. The IRI said cutting out experienced financial institutions could invite “unqualified entities from entering the workplace retirement plan marketplace.”
The IRI also endorsed pending proposals that would auto-enroll employees in work-sponsored retirement plans, and attaching student loan debt repayment to existing retirement plans.