New Senate Bill Would Prevent Retirement Plans from Omitting Workers Aged 18-20

The Helping Young Americans Save for Retirement Act was proposed in the Senate Wednesday, aiming to increase retirement plan participation for those aged 18 to 20.

Senators Bill Cassidy, R-Louisiana, and Tim Kaine, D-Virginia, introduced the bill to the Senate Health, Education, Labor and Pensions Committee. The bill would replace 21 with 18 as the minimum age for retirement plan inclusion for plans governed by the Employee Retirement Income Security Act.

Michael Kreps, a principal in Groom Law Group and a former senior counsel for the Senate HELP Committee, says that “ERISA and the [Internal Revenue] Code allow a plan sponsor to exclude employees that are under 21.” He adds that this “is not required, but it is permissible. The justification for that rule is that plans are really designed for longer-term employees, and young employees are often in temporary or short-term positions.”

Since the bill would replace 21 with 18 for this purpose, plans could still include workers younger than 18. The plan sponsors just would not be able to exclude those between 18 and 20 solely because of age. The bill does not modify other length-of-service requirements that can be set by the sponsors.

Since adding many young workers all at once could force some smaller plans to have to file mandatory audits, the bill comes with a five-year buffer. Any plan that admits workers aged 18 to 20 to their plan as a consequence of the bill would not have to count those new participants toward the audit threshold until five years have passed from the date that the first new 18, 19, or 20-year old was added to the plan.

Kreps explains that the bill would add “more participants to plans, which could result in some plans crossing the audit threshold.” Because of the five-year grace period “if you don’t need an audit under current law, you won’t need one if this bill passes.”

The Senate HELP Committee has not yet outlined a timetable to advance the bill.