Senators introduce bi-partisan bill to allow employees to participate in 401(k) plans as early as age 18

On November 17, Senator Bill Cassidy (R-LA), the Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, and Senator Tim Kaine (D-VA), a member of that committee, introduced 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.

• Not counted for determining audit requirement under 5500 rules: 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 proposal would not be taken into account until 5 years after they first entered the plan.

These changes would be effective beginning in 2026.

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While this proposal is unlikely to be passed as a standalone bill, it is likely to be under consideration in the next round of broad-based, bi-partisan retirement policy legislation.