Technical Fix Needed to Protect American Retirement Security and Small Businesses
Appeals to Congress to amend reconciliation bill that violates securities laws
WASHINGTON – The American Securities Association (ASA) today sent a letter to the House Ways and Means Committee urging Congress to provide a technical fix to the Build Back Better budget reconciliation legislation in order to promote retirement security and allow small businesses to offer low-cost automatic retirement plans to their workers.
“For years, ASA has worked with members of Congress on a bipartisan basis to advance policy solutions to make it easier for hardworking Americans in every socioeconomic class to save for retirement,” said ASA CEO Chris Iacovella. “If the Committee wants to strengthen America’s retirement security, close the savings gap, and create multiple options for small businesses to offer retirement options to their employees, then it must make legislative changes to address these concerns before the legislation is signed into law.”
In the letter, ASA highlighted how the legislation directly conflicts with existing securities laws, which prevents small businesses from offering SIMPLE plans and Automatic IRA arrangements to their workers, and effectively makes 401(k) plans the only eligible retirement option small businesses can offer.
Current securities laws prevent an employer from establishing an IRA on behalf of an individual. These rules also impose know-your-customer (KYC), investment authorization, dispute resolution, and Regulation Best Interest (Reg BI) requirements for IRAs that cannot be satisfied without action by the account holder (in this case, the employee of a small business). This means SIMPLE and Automatic IRA plans cannot be opened automatically on behalf of an employee by an employer.
“Without changes, the legislation would require small businesses to use 401(k) plans as that would be the only option available to them,” Iacovella wrote. “While 401(k) plans are an excellent option for some businesses, they are not appropriate for every business. The cost to establish a 401(k), the time and complexity of compliance, the fiduciary responsibility, and other obligations would cause many small businesses without sophisticated HR departments to violate the bill’s mandate. Additionally, businesses that would like to establish a SIMPLE IRA or Automatic IRA Arrangement plan for their employees but cannot because of technical legal flaws in the legislation could face a $10 per employee per day penalty. This outcome would needlessly harm small businesses and their workers across America.”
“We want to work with this Committee on language to make a technical fix to this well-intended policy,” Iacovella concluded.
ASA’s regional financial services companies work in communities across the country to create jobs, grow the economy, and increase prosperity for all Americans. The ASA exclusively represents the capital market and private client interests of its members and seeks to promote free market principles making it easier to access financial advice and capital. ASA members help Americans save for retirement, provide Main Street businesses with capital to grow, and advise hardworking Americans how to create and preserve wealth. For the latest updates follow @AmerSecurities and learn more at http://americansecurities.org/.