Lawmakers renew push to increase SIMPLE plan contributions

Sens. Susan Collins, R-Me., and Mark Warner, D-Va., are again pursuing an update for SIMPLE plans, seeking to expand access and increase how much retirement savers can contribute.

On Wednesday, the senators introduced a bill, the SIMPLE Modernization Act, which they also floated in the prior two Congresses. The two prior iterations of the bill died in committee.

The legislation would bump up the annual contribution limit, taking it from the current maximum of $13,500 to $16,500, which the senators note is the midpoint between Savings Incentive Match Plan for Employees plans and traditional 401(k)s. Similarly, catch-up contributions would be hiked from $3,000 to $4,750, according to an announcement of the bill.

The increased contribution limit would apply to businesses with between one and 25 employees, though larger companies with up to 100 workers could also take advantage of it, if they increase their mandatory employer contributions by one percentage point. That requirement is designed to encourage businesses to switch to traditional 401(k)s “when they can do so,” according to Collins’ office.

Savings Incentive Match Plan for Employees plans were codified in 1996 and are open to businesses with up to 100 employees.

In recent years there have been numerous state and national initiatives to increase retirement plan access, including the advent of pooled employer plans and various automatic-IRA-style programs. Both Maine and Virginia — the senators’ home states — have considered bills that would establish auto-IRA systems similar to those already implemented in Oregon, Illinois and California. Virginia’s House passed such a bill in late January, and the legislation is currently in the Senate.

State initiatives are a good alternative to SIMPLE plans, as “very small plans have no chance to achieve scale, which is a problem,” said Olivia Mitchell, professor at The Wharton School and executive director of the Pension Research Council, in an email. Mitchell and others recently published an analysis of OregonSaves, finding that younger workers and employees at larger companies are least likely to opt out, doing so most often because they cannot afford to save or already have a retirement plan.