Walberg, Sablan Introduce Retirement Plan Modernization Act
Washington, D.C.—U.S. Congressmen Tim Walberg (MI-07) and Gregorio Kilili Camacho Sablan (MP-00) introduced the Retirement Plan Modernization Act, which will make it easier for small businesses to offer retirement plans while keeping fees down for employees. The bipartisan bill helps small businesses better manage the administrative expenses of retirement plans by providing a long-overdue update to the automatic IRA rollover limit for former employees’ assets.
“Far too many families in Michigan are struggling to save for their retirement years,” said Congressman Walberg. “Often businesses will cite not having enough resources to administer a plan, as a key reason for not offering retirement benefits. This bipartisan bill is a commonsense step in our efforts to empower every American to retire with financial security and peace of mind. By reducing administrative costs, we can help more small businesses offer retirement benefits and ensure employees are not needlessly stuck paying higher fees.”
“The Chamber thanks Representatives Walberg and Sablan for introducing the bipartisan Retirement Plan Modernization Act. Increasing the cash-out limit is long overdue. It has not been touched in two decades and is not subject to indexing, unlike many other limits in the retirement system. Updating both of these flaws will streamline retirement plan administration and reduce burdens for employers, especially small businesses,” said Chantel Sheaks, Executive Director of Retirement Policy at the U.S. Chamber of Commerce.
“Increasing the threshold for employers to cash-out retirement plan accounts brings us into the 21st century and reduces administrative expenses which in turn makes it easier for employers to maintain retirement plans and for employees to keep their retirement assets with them as they move jobs,” said Lynn Dudley, Senior Vice President, Global Retirement and Compensation Policy at the American Benefits Council.
Under current law, automatic IRA rollovers occur if a participant is no longer employed by the employer sponsoring the retirement plan and their balance is between $1,000 and $5,000. Congress has periodically adjusted the cash-out limit over the years to reflect increasing costs of administration; however, the last time it was updated was 1997. The Retirement Plan Modernization Act would raise the automatic IRA rollover limit, based on the rate of inflation, from $5,000 to $8,000 and allow for future increases to be indexed for inflation.