For small-business employees yearning to grow retirement savings, the Retirement Security Act may just be the solution needed to carry them towards a sustainable future, according to its sponsors.
U.S. Senator and the Chairman of the Senate Aging Committee Susan Collins (R-Maine), along with Senator Bill Nelson (D-Florida), recently introduced the legislation. They say it is aimed at encouraging small businesses to offer retirement plans to more workers, while also establishing a positive savings mindset among employees.
According to Collins, at a high level the legislation would “improve the financial security of many Americans by reducing the cost and complexity of retirement plans.” It would direct the Treasury Department to clarify complicated notices, clarify costs, and reduce tax burdens on low- and middle-income retirement plan contributors by implementing a new “saver’s credit” on Form 1040 EZ.
The senators cite data from the Center for Retirement Research, which found American households face a $7.7 trillion gap between savings needed to meet a preferred standard of living, versus the amount workers are actually putting away. Additionally, just 54% of working Americans are certain their savings will last long into retirement, according to a recent Gallup poll.
To combat poor retirement planning, the Retirement Security Act would allow businesses to share the burden of plan administrative without demanding a connection between both entities. This enables businesses to link with multiple employer plans (MEPs) and provide enhanced retirement programs. MEP members, according to the bill, are secured from risking tax benefits in case an employer in an MEP fails to meet the minimum criteria plans need to retain these benefits.
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