1.Short title; table of
contents
(a)This Act may be cited
as the Small Businesses Add Value for
Employees Act of 2011
or the SAVE Act of 2011
.
(b)The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Elimination of restriction on SIMPLE IRA
rollovers.
Sec. 3. Allowing mid-year SIMPLE IRA plan
termination.
Sec. 4. Elimination of higher penalty on early SIMPLE IRA
distributions.
Sec. 5. Increase in contributions allowed for SIMPLE
IRA.
Sec. 6. SIMPLE 401(k) parity
for additional nonelective employer contributions.
Sec. 7. Automatic deferral IRAs.
Sec. 8. 401(k) automatic
deferral percentage parity.
Sec. 9. Limited transfer of unused balance in flexible spending
arrangement.
Sec. 10. Prior years compensation taken into account in
determining maximum retirement savings deduction.
Sec. 11. Expanding small employer pension plan startup cost
credit.
Sec. 12. Financial education.
Sec. 13. Multiple small employer plan.
Sec. 14. Clarification of treatment of multiple employer
defined contribution plans.
Sec. 15. Clarification of treatment of individual retirement
plans with payroll deduction.
Sec. 16. Disclosure regarding lifetime income.
2.Elimination of
restriction on SIMPLE IRA rollovers
(a)Paragraph (3) of section 408(d) of the Internal Revenue
Code of 1986 (relating to rollover contribution) is amended by striking
subparagraph (G).
(b)The amendment made by this section shall apply to
distributions in taxable years beginning after the date of the enactment of
this Act.
3.Allowing mid-year
SIMPLE IRA plan termination
(a)Subsection (p) of section 408 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
(11)Special rules
relating to mid-year termination
(A)An employer may elect to terminate (in such form and
manner as the Secretary may provide) the qualified salary reduction arrangement
of the employer at any time during the year.
(B)Proration and
application of qualified plan limitationIn the case of a year
during which an employer terminates a qualified salary reduction arrangement
before the end of such year—
(i)the applicable
dollar amount in effect for such year shall be prorated to the date of such
termination,
(ii)for purposes of
determining the compensation of an employee for such arrangement for such year,
the year of such termination shall be treated as ending on the date of such
termination, and
(iii)subparagraph (D)
of paragraph (2) shall not apply with respect to a qualified plan maintained in
such year only after the date of such
termination.
.
(b)The amendments made by this section shall apply to years
beginning after the date of the enactment of this Act.
4.Elimination of
higher penalty on early SIMPLE IRA distributions
(a)Subsection (t) of section 72 of the Internal Revenue Code
of 1986 (relating to 10-percent additional tax on early distributions from
qualified retirement plans) is amended by striking paragraph (6).
(b)The amendment made by this section shall apply to
distributions in taxable years beginning after the date of the enactment of
this Act.
5.Increase in
contributions allowed for SIMPLE IRA
(a)Additional
nonelective employer contributions allowed
(1)Subparagraph (A) of section 408(p)(2) of the Internal
Revenue Code of 1986 (relating to qualified salary reduction arrangement) is
amended by striking and
at the end of clause (iii), by
redesignating clause (iv) as clause (v), and by inserting after clause (iii)
the following new clause:
(iv)the employer may make, in addition to any
other contribution under this paragraph, nonelective contributions of not more
than 10 percent of compensation (subject to the limitation described in
subparagraph (B)(ii)) for each employee who is eligible to participate in the
arrangement and who has at least $5,000 of compensation from the employer for
the year,
and
.
(2)Clause (v) of section 408(p)(2)(A) of such Code, as
redesignated by this section, is amended by striking clause (i) or
(iii)
and inserting clause (i), (iii), or (iv)
.
(b)Increase in
elective contribution limitationSubparagraph (E) of section
408(p)(2) is amended to read as follows:
(E)For purposes of subparagraph (A)(ii), the
applicable dollar amount shall be the applicable dollar amount in effect under
subparagraph (B) of section
402(g)(1).
.
(c)SIMPLE IRA
subject to defined contribution plan limitationSubsection (p) of
section 408 of such Code is amended by adding at the end the following new
paragraph:
(11)Subject to
defined contribution plan limitationAn arrangement shall not be treated as a
qualified salary reduction arrangement for any year if contributions with
respect to any employee for the year exceed the limitation of paragraph (1) of
section 415(c) (relating to limitation for defined contribution
plans).
.
(d)The amendments made by this section shall apply to
contributions for taxable years beginning after December 31, 2011.
6.SIMPLE
401(k) parity for additional nonelective
employer contributions
(a)Subparagraph (B) of
section 401(k)(11) of such Code (relating to contribution requirements) is
amended by adding at the end the following new clause:
(iv)Special rule
for additional nonelective employer contributionsAn arrangement shall not be treated as
failing to meet the requirements of this subparagraph merely because under such
arrangement the employer makes, in addition to any other contribution under
this subparagraph, nonelective contributions of not more than 10 percent of
compensation for each employee who is eligible to participate in the
arrangement and who has at least $5,000 of compensation from the employer for
the
year.
.
(b)The amendment made by this section shall apply to plan years
beginning after December 31, 2011.
7.
(a)Subpart A of part I of subchapter D of chapter 1 of the
Internal Revenue Code of 1986 (relating to pension, profit-sharing, stock bonus
plans, etc.) is amended by inserting after section 408A the following new
section:
408B.
(a)An automatic deferral IRA shall be treated for purposes
of this title in the same manner as an individual retirement plan. An automatic
deferral IRA may also be treated as a Roth IRA for purposes of this title if it
meets the requirements of section 408A.
(b)For purposes of this section, the term
automatic deferral IRA means an individual retirement plan (as
defined in section 7701(a)(37)) with respect to which contributions are made
under an arrangement which satisfies the requirements of paragraphs (1) through
(4) of subsection (c).
(c)Automatic
deferral IRA arrangements
(1)
(A)The requirements of this paragraph are met if each
employee eligible to participate in the arrangement is treated as having
elected to have the employer make payments as elective contributions to an
automatic deferral IRA on behalf of such employee (which would have otherwise
been made to the employee directly in cash) in an amount equal to so much of a
qualified percentage of compensation of such employee as does not exceed the
deductible amount for such year (within the meaning of section 219(b)).
(B)An
employee is eligible to participate if such employee is described in paragraph
(2) of section 408(k), except that for purposes of determining whether an
employee is described in such paragraph, subparagraph (C) thereof shall be
applied by substituting $5,000
for $450
.
(C)The election treated as having been made under subparagraph
(A) shall cease to apply with respect to any employee who makes an affirmative
election—
(i)to
not have such elective contributions made, or
(ii)not later than
the close of the 30-day period beginning on the date of the first contribution
with respect to such employee, to make elective contributions at a level
specified in such affirmative election.
(D)For purposes of this paragraph, the term
qualified percentage means, with respect to any employee, any
percentage determined under the trust agreement if such percentage is applied
uniformly, does not exceed 15 percent, and is at least—
(i)3
percent during the period ending on the last day of the first plan year which
begins after the date on which the first elective contribution described in
subparagraph (A) is made with respect to such employee, and
(ii)during any
subsequent plan year, a percentage equal to—
(I)3 percent,
plus
(II)1 percent
multiplied by the number of plan years (but not more than 12) beginning after
the plan year described in clause (i).
(2)
(A)The requirements of this paragraph are met if, within a
reasonable period before the first day an employee is eligible to participate
in the arrangement, the employee receives written notice of the employee’s
rights and obligations under the arrangement which—
(i)is
sufficiently accurate and comprehensive to apprise the employee of such rights,
and
(ii)is written in a
manner calculated to be understood by the average employee to whom the
arrangement applies.
(B)A notice shall not be treated as meeting the requirements
of subparagraph (A) with respect to an employee unless—
(i)the notice explains the employee’s right to
elect not to have elective contributions made on the employee's behalf (or to
elect to have such contributions made at a different percentage),
(ii)the notice explains how contributions made
under the arrangement will be invested in the absence of any investment
election by the employee, and
(iii)the employee has a reasonable period of
time after receipt of the notice described in clauses (i) and (ii) and before
the first elective contribution is made to make either such election.
(3)Default
investment arrangementThe requirements of this paragraph are met
if—
(A)in the absence of
an investment election by the employee with respect to the employee’s interest
in the trust, such interest is invested as provided in regulations prescribed
pursuant to subparagraph (A) of section 404(c)(5) of the Employee Retirement
Income Security Act of 1974, and
(B)the employer
provides each employee who has an interest in the trust, notice which meets the
requirements of subparagraph (B) of such section.
(4)Administrative
requirementsThe requirements of this paragraph are met
if—
(A)an employer must
make the elective employer contributions under paragraph (1)(A) not later than
the close of the 30-day period following the last day of the month with respect
to which the contributions are to be made,
(B)an employee may
elect to terminate participation in the arrangement at any time during the
year, except that if the employee so terminates, the arrangement may provide
that the employee may elect to resume participation until the beginning of the
next year, and
(C)each employee
eligible to participate may elect, during the 30-day period before the
beginning of any year, or to modify the amount subject to such arrangement, for
such
year.
.
(b)Preemption of
conflicting State lawsAny
law of a State shall be superseded if it would directly or indirectly prohibit
or restrict an employer from creating or organizing an automatic deferral IRA
(as defined in section 408B of the Internal Revenue Service of 1986).
(c)The table of sections for subpart A of part I of
subchapter D of chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after the item relating to 408A the following new item:
408B. Automatic deferral
IRAs.
.
(d)The amendments made by this section shall apply to taxable
years beginning after December 31, 2011.
8.401(k)
automatic deferral percentage parity
(a)Clause (iii) of
section 401(k)(13)(C) of the Internal Revenue Code of 1986 is amended by
striking 10 percent
and inserting 15
percent
.
(b)The amendment made by this section shall apply to plan years
beginning after December 31, 2011.
9.Limited transfer
of unused balance in flexible spending arrangement
(a)Section 125 of the
Internal Revenue Code of 1986 is amended by redesignating subsections (i) and
(j) as subsections (j) and (k), respectively, and by inserting after subsection
(h) the following new subsection:
(i)Special rule for
unused benefits in flexible spending arrangements
(1)For purposes of this
title, a plan or other arrangement shall not fail to be treated as a cafeteria
plan or flexible spending arrangement merely because such arrangement provides
for qualified retirement distributions.
(2)Qualified
retirement distribution
(A)For purposes of this
section, the term qualified retirement distribution
means any
distribution to an individual of all or a portion of the employee’s account
under such arrangement, but only to the extent—
(i)the amount does
not exceed the lesser of—
(I)$250, or
(II)the unused
benefits with respect to the arrangement, and
(ii)the amount
received is paid into a qualified retirement plan (as defined in section
4974(c)), or an eligible deferred compensation plan (as defined in section
457(b)) of an eligible employer described in section 457(e)(1)(A), of the
individual not later than the 60th day after the day on which the individual
receives the payment or distribution.
(B)For purposes of this paragraph, the term unused
benefits
means, with respect to an employee, the excess of—
(i)the maximum amount
of reimbursement allowable to the employee during a plan year under a flexible
spending arrangement, over
(ii)the actual amount
of reimbursement during such year under such arrangement.
(C)Special rules
for treatment of contributions to retirement plansFor purposes
of this title, qualified retirement distributions—
(i)shall be treated as elective deferrals (as
defined in section 402(g)(3)) in the case of contributions to a qualified cash
or deferred arrangement (as defined in section 401(k)) or to an annuity
contract described in section 403(b),
(ii)shall be treated
as employer contributions to which the employee has a nonforfeitable right in
the case of a plan which is described in section 401(a) which includes a trust
exempt from tax under section 501(a),
(iii)shall be treated
as deferred compensation in the case of contributions to an eligible deferred
compensation plan (as defined in section 457(b)), and
(iv)shall be treated
in the manner designated for purposes of section 408 or 408A in the case of
contributions to an individual retirement
plan.
.
(b)The amendments made by this section shall apply to plan
years ending after the date of the enactment of this Act.
10.Prior years
compensation taken into account in determining maximum retirement savings
deduction
(a)Subparagraph (B) of
section 219(b)(1) of the Internal Revenue Code of 1986 is amended by striking
for such taxable year
and inserting for the preceding
taxable year
.
(b)The amendment made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.
11.Expanding small
employer pension plan startup cost credit
(a)
(1)Including
startup costs for employer-established IRAsParagraph (2) of
section 45E(d) of the Internal Revenue Code of 1986 (defining eligible employer
plan) is amended by striking means a qualified employer plan
and
all that follows and
inserting:
means—(A)a qualified employer plan within the
meaning of section 4972(d), or
(B)a plan of which a
trust described in section 408(c) is a
part.
.
(2)
(A)Subsection (a) of section 45E of such Code is amended by
striking 50 percent of
and all that follows and
inserting
the sum
of—(1)the applicable
percentage of the qualified startup costs paid or incurred by the taxpayer
during the taxable year, plus
(2)$25 multiplied by
the number of employees of the employer who participate in any eligible
employer plan of the employer for the first time in such taxable
year.
.
(B)Subsection (d) of section 45E of such Code is amended
by adding at the end the following new paragraph:
(4)The applicable
percentage is—
(A)in the case of a
plan described in subsection (d)(2)(A), 75 percent, or
(B)in the case of a
plan described in subsection (d)(2)(B), 50
percent.
.
(C)Paragraph (2) of section 45E(c) of such Code (defining
eligible employer) is amended—
(i)by
striking qualified employer plan
in each place it appears and
inserting eligible employer plan
, and
(ii)by striking
qualified
in the heading thereof and
inserting eligible
.
(3)Paragraph (1) of section 45E(b) of such Code is
amended by striking $500
and inserting $750 ($2,000 in
the case of qualified startup costs attributable to a plan described in
subsection (d)(2)(A))
.
(b)The amendment made by this section shall apply to costs paid
or incurred in taxable years beginning after the date of the enactment of this
Act.
12.
(a)Retirement plan
education for small businessesNot later than 6 months after the date of
the enactment of this Act—
(1)the Department of
the Treasury Office of Financial Education, in consultation with the Department
of Labor, shall develop and implement an outreach plan to educate small
businesses on the types of retirement plans available and the benefits and
requirements of such plans, and
(2)the Secretary of
the Treasury and the Secretary of Labor shall develop recommendations for small
businesses in order to improve retirement outcomes. Such recommendations shall
take into account established behavioral trends of employee investment and the
effect of default design features such as auto escalation, expansion of auto
rollovers, auto diversification for near retirees, and automatic forms of
distribution.
(b)
(1)Not later than 1 year after the date of the enactment of
this Act, the Secretary of the Treasury, in consultation with the Secretary of
Education, shall develop sample age-appropriate curricula to be made available
for financial literacy education in elementary and secondary schools.
(2)Such curricula shall include the following:
(A)How to balance a
checkbook, read a credit card statement, and calculate interest rates.
(B)What a pay stub is
and why Federal and State income taxes and Social Security and Medicare taxes
are withheld from wages.
(C)The differences
between various types of bank accounts.
(D)The significance
of a credit score and how to read credit reports.
(E)The marketing
techniques frequently used by individuals and businesses to attract
patrons.
(F)The importance of
saving for college and retirement, including the various methods for saving
such as traditional pensions, 401(k)s, and IRAs.
13.Multiple small
employer plan
(a)Paragraph (11) of section 401(k) of the Internal Revenue
Code of 1986 is amended by adding the following at the end thereof:
(E)Multiple small
employer plan
(i)In the case of a plan described in clause (ii)—
(I)the amount
described in subparagraph (B)(i)(I) shall be $10,000, in lieu of the amount in
effect under section 408(p)(2)(A)(ii),
(II)such $10,000
amount shall be adjusted as described in section 408(p)(2)(E)(ii) except that
the base period taken into account shall be the calendar quarter beginning July
1, 2011,
(III)subclause (II)
of subparagraph (B)(i) and clause (ii) of subparagraph (B) shall not apply,
and
(IV)section 414(v)
shall not apply.
(ii)A plan is described in this clause if the plan
satisfies the following requirements:
(I)Such plan
satisfies the requirements of this paragraph, as modified by clause (i).
(II)The plan is
described in section 413(c).
(III)The plan
includes a qualified automatic contribution arrangement, as defined in
paragraph (13), except that subparagraph (D) of paragraph (13) shall not apply
and the qualified percentage shall be determined by reference to subclauses
(I), (II), (III), and (IV) of paragraph (13)(C)(iii).
(IV)The plan does not
permit any participant or beneficiary to receive or maintain a loan from the
plan.
(V)The plan does not
permit hardship distributions described in paragraph (2)(B)(i)(IV) except to
the extent any such distribution is deemed, under regulations prescribed by the
Secretary, to be on account of an immediate and heavy financial need of the
employee and necessary to satisfy an immediate and heavy financial need of the
employee.
(VI)The plan is
maintained pursuant to a model plan document published by the
Secretary.
.
(b)
(1)Within one year of the date of the enactment of this Act,
the Secretary of the Treasury shall publish a model plan that may be used to
satisfy the requirement of subclause (VI) of section 401(k)(11)(E)(ii) of the
Internal Revenue Code of 1986.
(2)Within 120 days of the date of the enactment of this
Act, the Secretary of Labor shall amend Department of Labor Regulation section
2550.404c–5(e)(4)(iv)(B) so that, in the case of a plan described in section
401(k)(11)(E) of such Code four years
shall be substituted for
120 days
.
(3)Clarifying
duties and reducing burdensWithin one year of the date of the
enactment of this Act, the Secretary of Labor shall—
(A)publish rules clarifying the extent to
which the fiduciary duties of a participating employer and of a named fiduciary
with respect to a plan described in section 401(k)(11)(E) of such Code are
limited to prudently selecting and monitoring the provider of such plan and the
services, fees, and investment options available from such provider, and
(B)prescribe interim
final regulations providing simplified means by which plans described in
section 401(k)(11)(E) of such Code may satisfy the requirements of sections
102, 103, and 105 of the Employee Retirement Income Security Act of
1974.
(4)Elimination of
disincentive to poolingNot
later than one year after the date of the enactment of this Act, the Secretary
of the Treasury shall prescribe final regulations under which a plan described
in section 413(c) of such Code may be treated as satisfying the qualification
requirements of section 401(a) of such Code despite the violation of such
requirements with respect to one or more participating employers. Such rules
may require that the portion of the plan attributable to such participating
employers be spun off to plans maintained by such employers.
(c)
(1)Except as provided in paragraph (2), the amendments made
by this section shall apply to years beginning after December 31, 2011.
(2)Subsection
(b) shall apply as of the date of the enactment of this Act.
14.Clarification of
treatment of multiple employer defined contribution plans
(a)Section 3(2) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)) is amended
by adding at the end thereof the following new subparagraph:
(C)A
plan, fund, or program shall not fail to be treated as an employee pension
benefit plan solely by reason of the plan, fund, or program being established
or maintained by two or more employers whose only relationship is participation
in the same plan, fund, or program. This subparagraph shall only apply to a
plan, fund, or program that provides for an individual account for each
participant and for benefits based solely upon the amount contributed to the
participant’s account, and any income, expenses, gains and losses, and any
forfeitures of accounts of other participants which may be allocated to such
participant’s
account.
.
(b)Section 3(2)(A) of
such Act is amended by striking Except as provided in subparagraph
(B)
and inserting Except as provided in subparagraphs (B) and
(C)
.
(c)The amendments made by this section shall take effect on the
date of enactment of this Act.
15.Clarification of
treatment of individual retirement plans with payroll deduction
(a)Section 3(2) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1002(2)), as amended by this Act, is amended by adding
at the end the following new subparagraph:
(D)An individual retirement plan (as defined
in section 7701(a)(37) of the Internal Revenue Code of 1986) shall not be
considered a pension plan merely because an employer establishes a payroll
deduction program for the purpose of enabling employees to make voluntary
contributions to such account or
annuity.
.
(b)The amendments made by this section shall take effect on the
date of the enactment of this Act.
16.Disclosure regarding
lifetime income
(a)Subparagraph (B) of section 105(a)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1025(a)(2)) is
amended—
(1)in clause (i), by
striking and
at the end;
(2)in clause (ii), by
striking diversification.
and inserting diversification,
and
; and
(3)by inserting at
the end the following:
(iii)the lifetime
income disclosure described in subparagraph (D)(i).
In the
case of pension benefit statements described in clause (i) of paragraph (1)(A),
a lifetime income disclosure under clause (iii) of this subparagraph shall only
be required to be included in one pension benefit statement during any one
12-month
period..
(b)Paragraph (2) of section 105(a) of such Act (29 U.S.C.
1025(a)) is amended by adding at the end the following new subparagraph:
(D)Lifetime income
disclosure
(i)
(I)A
lifetime income disclosure shall set forth the lifetime income stream
equivalent of the total benefits accrued with respect to the participant or
beneficiary.
(II)Lifetime income
stream equivalent of the total benefits accruedFor purposes of
this subparagraph, the term lifetime income stream equivalent of the
total benefits accrued means the amount of monthly payments the
participant or beneficiary would receive if the total accrued benefits of such
participant or beneficiary were used to provide lifetime income streams
described in subclause (III), based on assumptions specified in rules
prescribed by the Secretary.
(III)The lifetime income streams described in this
subclause are a qualified joint and survivor annuity (as defined in section
205(d)), based on assumptions specified in rules prescribed by the Secretary,
including the assumption that the participant or beneficiary has a spouse of
equal age, and a single life annuity. Such lifetime income streams may have a
term certain or other features to the extent permitted under rules prescribed
by the Secretary.
(ii)Not later than 1 year after the date of the enactment
of the Lifetime Income Disclosure
Act, the Secretary shall issue a model lifetime income
disclosure, written in a manner so as to be understood by the average plan
participant, that—
(I)explains that the
lifetime income stream equivalent is only provided as an illustration;
(II)explains that the
actual payments under the lifetime income stream described in clause (i)(III)
that may be purchased with the total benefits accrued will depend on numerous
factors and may vary substantially from the lifetime income stream equivalent
in the disclosures;
(III)explains the
assumptions upon which the lifetime income stream equivalent was determined;
and
(IV)provides such
other similar explanations as the Secretary considers appropriate.
(iii)Not later than 1 year after the date of the enactment
of the Lifetime Income Disclosure
Act, the Secretary shall—
(I)prescribe
assumptions that administrators of individual account plans may use in
converting total accrued benefits into lifetime income stream equivalents for
purposes of this subparagraph; and
(II)issue interim
final rules under clause (i).
In
prescribing assumptions under subclause (I), the Secretary may prescribe a
single set of specific assumptions (in which case the Secretary may issue
tables or factors that facilitate such conversions), or ranges of permissible
assumptions. To the extent that an accrued benefit is or may be invested in a
lifetime income stream described in clause (i)(III), the assumptions prescribed
under subclause (I) shall, to the extent appropriate, permit administrators of
individual account plans to use the amounts payable under such lifetime income
stream as a lifetime income stream equivalent.(iv)No plan fiduciary, plan sponsor, or other person shall
have any liability under this title solely by reason of the provision of
lifetime income stream equivalents which are derived in accordance with the
assumptions and rules described in clause (iii) and which include the
explanations contained in the model lifetime income disclosure described in
clause (ii). This clause shall apply without regard to whether the provision of
such lifetime income stream equivalent is required by subparagraph
(B)(iii).
(v)The requirement in subparagraph (B)(iii) shall apply to
pension benefit statements furnished more than 12 months after the latest of
the issuance by the Secretary of—
(I)interim final
rules under clause (i);
(II)the model
disclosure under clause (ii); or
(III)the assumptions
under clause
(iii).
.
(c)The amendments made by this section shall take effect on the
date of the enactment of this Act.