U.S. Rep. Kind Announces New Bill to Help Small Businesses Offer Savings Plans to Employees
U.S. Rep. Ron Kind (D-WI), member of the House Committee on Ways and Means, today announced new legislation to encourage more small businesses to offer retirement savings plans to their employees. The Small Businesses Add Value for Employees (SAVE) Act of 2008 (H.R. 5160) would increase incentives for small businesses to start SIMPLE IRA and 401(k) retirement plans, providing more flexibility and reducing administrative burdens. The bill is cosponsored by Rep. Kenny Hulshof (R-MO), also a member of the Ways and Means Committee.
"A comfortable retirement is something everyone seeks to achieve - whether they work for a big corporation or a small business," Rep. Kind said. "But the majority of small businesses don't offer any retirement savings plans to employees because it is often a complicated, costly, and a somewhat risky endeavor. This bill will actually incentivize small businesses to offer savings plans, allowing workers to accumulate retirement savings and helping small businesses attract and retain employees."
Small business owners often wear multiple hats and simply do not have enough time and resources to devote to administering a complicated financial product. According to a survey of small businesses conducted by Harris Interactive, only 14 percent of small businesses offer a 401(k) plan and 63 percent do not offer any form of retirement benefits at all.
SIMPLE IRA and 401(k) plans were created in 1996 to address the need for an easy way to administer savings plans for small businesses. Since then, many small businesses have taken advantage of SIMPLE plans, with nearly two million workers now covered by one. However, the rules governing SIMPLE plans need updating to ensure they continue to be attractive for small business owners, and there is great potential for growth in retirement plan coverage using SIMPLEs as the foundation. H.R. 5160 would modify the successful features of the SIMPLE plan by:
* Offering newly participating employers a tax credit for 50 percent of the start-up costs, and a one-time $25 tax credit for every employee who is enrolled in the savings program.
* Creating voluntary automatic IRAs for employers.
* Removing the higher penalty on early SIMPLE IRA distributions.
* Raising the annual contribution limit for SIMPLE plans to the same level as 401(k) plans.
* Allowing SIMPLE plan participants to rollover their retirement assets.
Sherry Wuebben, co-owner of St. Joseph Equipment of La Crosse is an example of a small business owner who could have benefited from the SAVE Act while her business was growing.
"Small businesses know two things about establishing retirement plans for their workers," Wuebben said. "First, we understand how important retirement benefits are to attracting and retaining quality employees. Second, small businesses know how expensive and challenging it can be to set up and administer a retirement savings plan. Small businesses will applaud Congressman Kind's legislation because it offers both incentives and simplicity - two features that are essential to helping small business owners and their employees access new tools for retirement savings."
"The SAVE Act provides simplified and voluntary options for small-business owners to offer retirement savings plans," said Dan Danner, Executive Vice President of Federal Public Policy for the National Federation of Independent Businesses. "We appreciate Congressman Kind's efforts to reduce complexity while helping small businesses and their employees plan and save for their retirement."
"The SIMPLE IRA can be even more effective in getting small employers to maintain retirement plans for their employees if the reforms that Rep. Kind is proposing are enacted into law," said Liz Varley with the Securities Industry and Financial Markets Association. "Through a voluntary incentive, the burdens on small businesses will be minimized and more people will be able to take advantage of tax-deferred retirement plans. We look forward to working with Rep. Kind to advance this important legislation to help small employers and their employees retire comfortably."
A fact sheet on the specific provisions included in the bill is attached.