Saving for retirement is like flossing–everyone knows they need to, but many are slow to get around to it. According to a survey of retirees by Bankers Life and Casualty’s “Center for a Secure Retirement,” 39% of participants said the most important advice they could give the younger generations was “save for the future.”

Saving for retirement can be a challenge for a lot of reasons, but especially if you are employed by a small business. A recent Pew report revealed that only 53% of small and medium-sized businesses offer any kind of retirement plan to their employees. If you run a small business, you know how challenging it can be to afford the costs associated with retirement plans. You also need the staff available to handle the necessary administrative work.

The Retirement Enhancement and Savings Act could potentially help you offer retirement benefits. If you are wondering where this legislation stands now, and how it could affect your business, read on.


What is the Retirement Enhancement and Savings Act?

In 2016, the U.S. Congress tried to help more small businesses offer retirement plans by creating the Retirement Enhancement and Savings Act. It received bipartisan approval by the Finance Committee but never progressed further because Congress adjourned before taking action.

The 2018 version of the bill is essentially the same as that proposed in 2016. The Retirement Enhancement and Savings Act (RESA) actually a compiles many small incentives and other legislative aids to help Americans plan their retirement savings more effectively. Here are the main components:


Multiple Employer Plans (MEPs)

One of the provisions of RESA would help small employers who can’t afford the cost or administrative load of 401(K) plans to band together in order to share costs. MEPs already exist, but with limited scope. The Retirement Enhancement and Savings Act would eliminate the requirement that participating employers have something in common–like being branches of a chain store. Also, currently if one member of a MEP breaks the rules, the entire MEP ends. RESA would modify that.


Repeals Age Requirement for IRAs

Currently, you can’t contribute to an IRA after the age of 70 ½. This legislation would get rid of that age limitation.


Financial Incentives

RESA offers tax credit incentives to encourage small business employers to start retirement plans for their employees.


Easier to Have Annuities

RESA modifies the rules about including annuities in retirement plans, making it easier for employers to offer them. Employees are also able to roll over their annuities into IRAs under RESA, if they change jobs.

As you can see, this bipartisan legislation would offer a number of benefits regarding retirement plans. It will be interesting to watch its progress through Congress this year.


What to Look For

A decision on RESA is expected as part of what some are calling “Tax Reform 2.0.” It constitutes a follow-up to last year’s Tax Cuts and Jobs Act. There is debate about whether a vote will take place before or after the November midterm election. So stay tuned and, if you need assistance with your small business accounting, contact us.


PHOTO: Pixabay / CC0 Public Domain