S 1020 — Retirement Security Flexibility Act of 2019

Summary

Retirement Security Flexibility Act of 2019 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 April 03, 2019

From the bill's own amending language, matched to the official United States Code (current through Public Law 119-121).

• ▸ 26 U.S.C. § 401 Qualified pension, profit-sharing, and stock bonus plans Amends

  At 401(k)(13)(C), 401(k)(13)(C)(iii), and 401(k)(13).

  The law today

  (a) Requirements for qualification A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section— (1) if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan; (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401(a) or the trust which is part of such plan is exempt from taxation under section 501(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination)); (3) if the plan of which such trust is a part satisfies the requirements of section 410 (relating to minimum participation standards); and (4) if the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, there shall be excluded from consideration employees described in section 410(b)(3)(A) and (C). (5) Special rules relating to nondiscrimination requirements.— (A) Salaried or clerical employees.— A classification shall not be considered discriminatory within the meaning of paragraph (4) or section 410(b)(2)(A)(i) merely because it is limited to salaried or clerical employees. (B) Contributions and benefits may bear uniform relationship to compensation.— A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan bear a uniform relationship to the compensation (within the meaning of section 414(s)) of such employees. (C) Certain disparity permitted.— A plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the contributions or benefits of, or on behalf of, the employees under the plan favor highly compensated employees (as defined in section 414(q)) in the manner permitted under subsection (l). (D) Integrated defined benefit plan.— (i) In general.— A defined benefit plan shall not be considered discriminatory within the meaning of paragraph (4) merely because the plan provides that the employer-derived accrued retirement benefit for any participant under the plan may not exceed the excess (if any) of— (I) the participant’s final pay with the employer, over (II) the employer-derived retirement benefit created under Federal law attributable to service by the participant with the employer.  For purposes of this clause, the employer-derived retirement benefit created under Federal law shall be treated as accruing ratably over 35 years. (ii) Final pay.— For purposes of this subparagraph, the participant’s final pay is the compensation (as defined in section 414(q)(4)) paid to the participant by the employer for any year— (I) which ends during the 5-year perio...

  Official text at uscode.house.gov ↗

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

The bill creates additional nondiscrimination safe harbor rules for automatic contribution arrangements under the Internal Revenue Code, particularly benefiting small employers.

• Section 401(k)

  (15) Special nonelective and matching contribution rules for small employers.--

  It establishes new rules for how small employers can automatically contribute to retirement plans.

• Section 401(k)(13)(C)

  10 percent → 15 percent

  It raises the qualified percentage for automatic contributions from 10 percent to 15 percent.

• Section 401(k)(13)(C)(iii)(I)

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

  It modifies the cap on annual increases for automatic contributions.

• Section 401(k)(13)(C)(iii)

  subclauses (III) and (IV)

  It removes specific provisions related to automatic contributions, streamlining the rules.

• Section 401(k)(13)(C)

  clause (iv) → clause (iv) Automatic re-election required.--

  It establishes requirements for automatic re-election of employee contribution levels every three years.

• Section 401(k)(13)(C)

  (iv) Automatic re-election required.--The requirements of this subparagraph shall be treated as met only if, under the arrangement, every 3 years each employee--

  It mandates that employees not currently participating or contributing less than 3 percent be automatically treated as having elected higher contributions.

Action History

1. April 03, 2019

   Introduced in Senate

2. April 03, 2019

   Read twice and referred to the Committee on Finance.

Sponsors

• Todd Young · Primary

Subjects