More than 40 million Americans are not covered by a workplace retirement savings plan. Employees of smaller businesses are especially likely to lack access. This coverage gap is, in part, related to the complexity and legal obligations facing employers that wish to offer retirement plans.
To address this problem, many experts have suggested that employers—especially smaller employers—should be able to join larger retirement plans that serve the workers of many businesses. Third-party experts would organize these pooled plans, reducing the legal responsibilities and administrative burdens for the adopting employers. The Employee Retirement Income Security Act of 1974, the federal law that governs employee benefits, currently provides for such multiple-employer retirement plans in a limited way that most businesses cannot use.
On September 21, 2016, the Senate Finance Committee unanimously approved legislation to address this problem. The Retirement Enhancement and Savings Act would allow the formation of pooled-employer plans, which would enable businesses in different industries to offer a common retirement savings plan to their workers. Several members of Congress—Republicans and Democrats—and the administration have proposed similar approaches, as has the Bipartisan Policy Center.
This issue brief describes the coverage problem and existing law, then it explains how the Senate Finance Committee legislation and similar proposals to establish pooled plans could help to increase retirement savings.