DOL Aims to Expand Small Biz Retirement SavingsOctober 24, 2018
On Oct. 22, the U.S. Department of Labor (DOL) announced a Notice of Proposed Rulemaking aimed to help small businesses strengthen retirement security in America. The proposed rule would make it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans, which would allow small businesses to band together to offer 401(k) plans to their employees.
Following through on an executive order President Donald Trump signed in August, the proposal would allow businesses in a variety of industries to pool resources in a way that current regulations do not permit. Under the proposed rule, Association Retirement Plans could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide. Sole proprietors, as well as their families, would also be permitted to join such plans. In addition to association sponsors, the plans could also be sponsored through Professional Employer Organizations (PEO). A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers.
According to the DOL, enhancing workplace retirement savings is critical to the financial security of America’s workers. Approximately 38 million private-sector employees in the United States do not have access to a retirement savings plan through their employers. Association Retirement Plans offer these workers – and their families – enhanced savings opportunities.
With the changes, small businesses would gain negotiating leverage and economies of scale that big businesses enjoy when dealing with the financial institutions that offer retirement plans, the Labor Department said. “Association Retirement Plans give these employers a simple and less burdensome way to offer valuable retirement benefits to their employees,” Labor Secretary Alexander Acosta said. “The proposed rule helps working Americans — and their families — take care of themselves in their retirement years.”
Next steps include the proposal will need to be published in the Federal Register.