S 2602 — Retirement Security Flexibility Act of 2021

Summary

Retirement Security Flexibility Act of 2021 This bill modifies the nondiscrimination requirements that apply to certain employer-sponsored 401(k) retirement plans that include automatic contribution arrangements.

Bill Text

• Introduced Introduced in Senate Current html August 04, 2021

AI-generated reading aid from the bill's amendatory text — verify against the official bill.

The bill creates new nondiscrimination safe harbor rules for automatic contribution arrangements, particularly benefiting small employers and modifying existing rules regarding contributions and employee elections.

• 26 U.S.C. 401(k)(13)(C)

  (10 percent during the period described in subclause (I))

  This change removes the 10 percent limit on contribution percentages.

• 26 U.S.C. 401(k)(13)(C)(iii)

  3 percent → 3 percent, but not greater than 10 percent,

  This change modifies the maximum percentage from 3 percent to allow up to 10 percent.

• 26 U.S.C. 401(k)(13)(C)(iii)

  and

  This change adds a conjunction for the sentence structure.

• 26 U.S.C. 401(k)(13)(C)(iii)

  subclauses (III) and (IV)

  This change removes two subclauses, simplifying the rules.

• 26 U.S.C. 401(k)(13)(C)

  The requirements of this subparagraph shall be treated as met only if, under the arrangement, every 3 years each employee--

  This change establishes an automatic re-election requirement for employee participation every three years.

• 26 U.S.C. 401(k)(13)(C)

  who is eligible to participate in the arrangement, and who is not participating, or is contributing less than 3 percent of compensation, at the time of determination, is treated as having made the election described in clause (i) unless the employee makes a new election under clause (ii).

  This change ensures eligible employees who are not participating are deemed to have elected participation unless they opt out.

• 26 U.S.C. 401(k)(13)(C)

  the total elective deferrals (as defined in section 402(g)(3)(A)) with respect to any employee do not exceed an amount equal to the applicable percentage of the limitation otherwise applicable under section 402(g).

  This new requirement clarifies the cap on elective deferrals for small employers.

• 26 U.S.C. 401(k)(13)(C)

  for purposes of paragraph (13), the arrangement shall be treated as meeting the requirements of subparagraph (D) thereof if

  This addition specifies conditions under which arrangements can be deemed compliant.

• 26 U.S.C. 401(k)(13)(C)(i)

  equal to → equal to at least

  This change modifies the language to broaden the criteria for certain arrangements.

• 26 U.S.C. 401(k)(13)(C)(i)

  6 percent of compensation → 2 percent of compensation, and such matching contributions meet the requirement of subsection (m)(11)(B)

  This change lowers the required matching contribution for compliance.

• 26 U.S.C. 401(k)(13)(C)(i)

  3 percent → 1 percent

  This change reduces the minimum contribution percentage for better compliance options.

• 26 U.S.C. 401

  the applicable percentage with respect to an arrangement is-- 40 percent in the case of an arrangement which does not meet the requirements of paragraph (13)(D)...

  This establishes new contribution limits for small employers.

• 26 U.S.C. 401

  the amendments made by this section shall apply to plan years beginning after December 31, 2021.

  This sets an effective date for the new provisions.

• 26 U.S.C. 401

  immediate automatic deferral for current employees not required.

  This provides flexibility for employers in implementing the automatic contribution arrangements.

Action History

1. August 04, 2021

   Introduced in Senate

2. August 04, 2021

   Read twice and referred to the Committee on Finance.

Sponsors

• Todd Young · Primary

Subjects