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In this article we review recent Congressional activity related to retirement policy.
Confirmations
Hearings have been scheduled –
For PBGC Director nominee Janet Dhillon, on June 3, 2025, before the Senate Finance Committee. Ms. Dhillon’s nomination was approved by the Senate Health, Education, Labor and Pensions (HELP) Committee on May 15, 2025.
For Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA) nominee Daniel Aronowitz, on June 5, 2025, before the HELP Committee.
Assuming a favorable vote for these nominees in committee, the next hurdle will be finding “floor time” for a full Senate vote – something that may prove challenging in the current context.
Legislation
USA Retirement Accounts: On May 1, 2025, Senator Cruz introduced the Universal Savings Account Act of 2025. These tax-favored “general savings accounts” (reminiscent of the (George W.) Bush Lifetime Savings Accounts (LSAs) proposal) would provide:
Contribution limit: $10,000 plus $500 times the number of calendar years after 2024 (and before the current year), subject to a maximum of $25,000. All these dollar amounts would be inflation-adjusted.
Unrestricted withdrawals: There generally would be no restriction on distributions.
Roth tax treatment: The accounts would, in effect, get “Roth” tax treatment – tax on the way in but no tax on the way out.
Certain trust/custody rules would apply.
It’s unclear whether there is any support for this proposal in Congress or the Administration.
Age 18 401(k) participation: On May 12, 2025, Senators Bill Cassidy (R-LA), the Chairman of the Senate HELP Committee, and Senator Tim Kaine (D-VA), a member of that committee, reintroduced the Helping Young Americans Save for Retirement Act. The bill would require 401(k) plan sponsors to allow employees as young as 18 to make contributions. Their participation would, however, be subject to the following limits:
Not applicable to part-time employees: The long-term part-time rule – which allows an employee to participate if she has 2 years of part-time service of at least 500 hours/year – would not apply until age 21. This would, under the proposal, exclude from participation, e.g., college summer interns under age 21.
Nondiscrimination and top-heavy rules not to apply: Employers/sponsors could elect to exclude these under 21-year old participants from nondiscrimination testing, including 401(k) ADP and ACP testing, and from consideration under the Top-Heavy rules.
Counting for determining audit requirement under 5500 rules delayed: Sponsors of plans with 100 or more participants must, in connection with filing Form 5500/annual report, file audited financials. For purposes of that rule, employees participating solely by reason of the bill’s under-21 participation rule generally would not be taken into account until 5 years after they first entered the plan.
403(b) Securities/Banking fix: On May 20, 2025, the House Financial Services Committee voted to favorably report out the “Retirement Fairness for Charities and Educational Institutions Act of 2025,” legislation that would address the remaining obstacles under federal securities laws to the use of collective investment trusts in 403(b) plans. Similar legislation has been introduced in the Senate.
Auto Reenroll Act: On May 21, 2025, Senators Cassidy and Kaine reintroduced the “Auto Reenroll Act of 2025.” This bill generally clarifies that a plan provision “reenrolling,” after three years, non-participating/non-contributing employees (or participants contributing less than the plan-provided default) at plan default contribution rates will not jeopardize:
401(k) safe harbor “Qualified automatic contribution arrangement” treatment.
Tax Code “Permissible withdrawal” treatment from an “eligible automatic contribution arrangement.”
Treatment as an “automatic contribution arrangement” under ERISA.
Increase in the startup credit for “microemployers”:On May 23, 2025, Senators Hassan (D-NH) and Budd (R-NC) introduced the “Retirement Investment in Small Employers Act.” The bill would, for employers with 10 or fewer employees (“microemployers”), increase the current plan startup credit percentage from 50 percent to 100 percent and the dollar limitation from $500 to $2,500.
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We will continue to follow these issues.