Law Would Enable More Businesses to Offer 401(k)s

by Randy Addie, Retirement Plans Group of Sentry
With traditional pension plans in the rearview for many employers, company-sponsored plans have become an increasingly common employee benefit. Although 401(k) and profit- sharing plans are widely understood, more than 20 percent of all workers do not have access to a company-sponsored retirement plan, according to the U.S. Census Bureau. Additional studies suggest this percentage is higher for small to mid-sized businesses.

Many businesses, especially small companies, don’t offer this benefit because of concerns with the plan maintenance costs and administrative and fiduciary complexities. This concern got lawmakers’ attention, which led to new retirement plan legislation known as the SECURE Act (Setting Every Community Up for Retirement Enhancement).

The legislation aims to allow more businesses to provide 401(k) plans. It was passed by the House of Representatives and now awaits a Senate vote. If passed, it will be the largest change to retirement plan regulations in more than a decade. The act proposes:

Increasing access to multiple employer plans (MEPs)
While MEPs aren’t a new concept, the SECURE Act focuses on increasing flexibility for employers, allowing them to join together, regardless of industry, ownership, or location. MEPs essentially allow employers to join to offer a single retirement plan to their collective employee base. The goal is to create greater cost efficiency through scale and potentially reduce the administrative and fiduciary burden that a single plan sponsor may face.

Requiring lifetime income disclosures
This would require all statements of employees participating in a defined contribution plan—either a 401(k) or profit-sharing plan—to display a lifetime income disclosure at least annually. The purpose of the disclosure would be to reflect what a lump sum balance would generate in terms of income over the employee’s lifetime. Exact variables to be used in this calculation are undetermined.

Raising required minimum distribution (RMD) age
Currently, you’re required to begin taking distributions from your retirement account at age 70 ½. The SECURE Act would increase the age to 72. Another piece of legislation—the Retirement Enhancement and Savings Act—is proposing the RMD age to be 75.

Implementing tax credit for automatic enrollment
Automatic enrollment has had a positive impact on increasing plan participation. Implementing a tax credit is the result of an effort to increase its use across retirement plans.

Removing age limitations for IRA contributions
Historically, savers haven’t been able to continue to make contributions to individual retirement accounts beyond the age of 70 ½. The SECURE Act proposes to remove that limitation.

At Sentry, we understand the concerns you may have with the responsibilities of offering your employees a retirement plan. We’re happy to help our customers navigate industry changes, and we offer retirement plan reviews to companies that want to give their existing retirement plan a look.

For questions about this information or about your current retirement plan, please contact Randy Addie at He has more than 20 years of experience in the financial services industry and has specialized in employer-sponsored retirement plans for the past 15 years. Addie is a division manager with the retirement plans group at Sentry.

Sentry has been offering business retirement plan solutions since 1968 and currently has more than 2,900 retirement plan customers with assets under management exceeding $7 billion.