Starter 401(k) plans for employers with no retirement plan

(a)

In general

Section 401(k) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(16)

Starter 401(k) deferral-only plans for employers with no retirement plan

(A)

In general

A starter 401(k) deferral-only arrangement maintained by an eligible employer shall be treated as meeting the requirements of paragraph (3)(A)(ii).(B)

Starter 401(k) deferral-only arrangement

For purposes of this paragraph, the term starter 401(k) deferral-only arrangement means any cash or deferred arrangement which meets—(i)the automatic deferral requirements of subparagraph (C),(ii)the contribution limitations of subparagraph (D), and(iii)the requirements of subparagraph (E) of paragraph (13).(C)

Automatic deferral

(i)

In general

The requirements of this subparagraph are met if, under the arrangement, each employee eligible to participate in the arrangement is treated as having elected to have the employer make elective contributions in an amount equal to a qualified percentage of compensation.(ii)

Election out

The election treated as having been made under clause (i) shall cease to apply with respect to any employee if such employee makes an affirmative election—(I)to not have such contributions made, or(II)to make elective contributions at a level specified in such affirmative election.(iii)

Qualified percentage

For purposes of this subparagraph, the term qualified percentage means, with respect to any employee, any percentage determined under the arrangement if such percentage is applied uniformly and is not less than 3 or more than 15 percent.(D)

Contribution limitations

(i)

In general

The requirements of this subparagraph are met if, under the arrangement—(I)the only contributions which may be made are elective contributions of employees described in subparagraph (C), and(II)the aggregate amount of such elective contributions which may be made with respect to any employee for any calendar year shall not exceed $6,000.(ii)

Cost-of-living adjustment

In the case of any calendar year beginning after December 31, 2023, the $6,000 amount under clause (i) shall be adjusted in the same manner as under section 402(g)(4), except that 2022 shall be substituted for 2005.(iii)

Cross reference

For catch-up contributions for individuals age 50 or over, see section 414(v)(2)(B)(ii).(E)

Eligible employer

For purposes of this paragraph—(i)

In general

The term eligible employer means any employer which, during the first plan year of the cash or deferred arrangement described in subparagraph (B), does not maintain any other qualified plan. An employer treated as an eligible employer under the preceding sentence shall be treated as an eligible employer with respect to the arrangement for any subsequent plan year without regard to whether it maintains another qualified plan.(ii)

Qualified plan

The term qualified plan means a plan, contract, pension, account, or trust described in subparagraph (A) or (B) of paragraph (5) of section 219(g) (determined without regard to the last sentence of such paragraph (5)).

(b)

Certain annuity contracts

Subsection (b) of section 403 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(15)

Safe harbor deferral-only plans for employers with no retirement plan

(A)

In general

A safe harbor deferral-only plan maintained by an eligible employer shall be treated as meeting the requirements of paragraph (12).(B)

Safe harbor deferral-only plan

For purposes of this paragraph, the term safe harbor deferral-only plan means any plan which meets—(i)the automatic deferral requirements of subparagraph (C),(ii)the contribution limitations of subparagraph (D), and(iii)the requirements of subparagraph (E) of section 401(k)(13).(C)

Automatic deferral

(i)

In general

The requirements of this subparagraph are met if, under the plan, each eligible employee is treated as having elected to have the employer make elective contributions in an amount equal to a qualified percentage of compensation.(ii)

Election out

The election treated as having been made under clause (i) shall cease to apply with respect to any eligible employee if such eligible employee makes an affirmative election—(I)to not have such contributions made, or(II)to make elective contributions at a level specified in such affirmative election.(iii)

Qualified percentage

For purposes of this subparagraph, the term qualified percentage means, with respect to any employee, any percentage determined under the plan if such percentage is applied uniformly and is not less than 3 or more than 15 percent.(D)

Contribution limitations

(i)

In general

The requirements of this subparagraph are met if, under the plan—(I)the only contributions which may be made are elective contributions of eligible employees, and(II)the aggregate amount of such elective contributions which may be made with respect to any employee for any calendar year shall not exceed $6,000.(ii)

Cost-of-living adjustment

Cross reference

For catch-up contributions for individuals age 50 or over, see section 414(v)(2)(B)(ii).(E)

Eligible employer

For purposes of this paragraph—(i)

In general

The term eligible employer means any employer which, during the first plan year of the plan described in subparagraph (B), does not maintain any other qualified plan. An employer treated as an eligible employer under the preceding sentence shall be treated as an eligible employer with respect to the plan for any subsequent plan year without regard to whether it maintains another qualified plan.(ii)

Qualified plan

Eligible employee

For purposes of this paragraph, the term eligible employee means any employee of the employer other than an employee who is permitted to be excluded under paragraph (12)(A).

(c)

Catch-Up contributions for individuals age 50 and over

(1)Section 414(v)(2)(B) of the Internal Revenue Code of 1986 is amended by inserting , 401(k)(16), 403(b)(15), after 401(k)(11) each place it appears.(2)Section 414(v)(3)(B) of such Code is amended—(A)by inserting , 401(k)(16) after 401(k)(11), and(B)by inserting , 403(b)(15) after 403(b)(12).(d)

Simplified reporting

Section 104(a)(2)(A) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1024(a)(2)) is amended by striking or at the end of clause (i), by redesignating clause (ii) as clause (iii), and by inserting after clause (i) the following new clause:

(ii)is a starter 401(k) deferral-only arrangement described in section 401(k)(16)(B) of the Internal Revenue Code of 1986 or a safe harbor deferral-only plan described in section 403(b)(15) of such Code; or

(e)

Starter and safe harbor plans not treated as top-Heavy plans

Subparagraph (H) of section 416(g)(4) of the Internal Revenue Code of 1986 is amended—(1)by striking

arrangements

in the heading and inserting

arrangements or plans

,(2)by striking , and at the end of clause (i) and inserting and matching contributions with respect to which the requirements of section 401(m)(11) or 401(m)(12) are met, or, and(3)by striking clause (ii) and inserting after clause (i) the following new clause:

(ii)a starter 401(k) deferral-only arrangement described in section 401(k)(16)(B) or a safe harbor deferral-only plan described in section 403(b)(15).

(f)

Plans not subject to Employee Retirement Income Security Act of 1974

Applicable to plan years beginning after December 31, 2022, the Secretary of Labor shall update Field Assistance Bulletin No. 2010–01 to specify that the hiring of a new plan administrator or third-party administrator by a plan which is not previously subject to title I of the Employee Retirement Income Security Act of 1974 shall not cause such plan to be subject to such title.(g)

Effective date

The amendments made by this section shall apply to plan years beginning after December 31, 2022.