Article Summary
The Helping Young Americans Save for Retirement Act is a bill that aims to lower the minimum age for employer-sponsored 401(k) plans from 21 to 18. Reintroduced by Sen. Bill Cassidy, R.-La., and Sen. Tim Kaine, D-Va., the bill seeks to revise the Internal Revenue Service code and Employee Retirement Income Security Act of 1974 (ERISA) to expand access to these plans for young workers. The bill also intends to remove barriers discouraging companies from offering retirement benefits to younger employees.
What This Means for You
- Younger workers will have the opportunity to participate in 401(k) plans at age 18, enabling them to save for retirement earlier.
- Employers may face fewer obstacles when extending pension plans to employees under 21, potentially increasing the availability of these plans to younger workers.
- Encouraging consistent retirement contributions from young adults can result in greater earnings for the next generation of retirees, given the potential for decades of tax-deferred growth.
- Young adults without access to 401(k)s can still save for retirement using alternative savings and investment accounts, such as Roth IRAs and custodial brokerage accounts.
Original Post
More than 71 million Americans have access to 401(k) accounts — tax-advantaged retirement plans that allow workers to set aside pre-tax income and watch it grow tax-deferred. But some of the country’s youngest workers are left out, and a group of senators wants to fix that.
Under current laws, employer-sponsored 401(k) plans can be offered to younger workers, but employers often set the minimum age as high as 21. A recently reintroduced bill in the Senate would set the minimum age at 18, requiring employers that offer retirement plans to include their younger employees.
The “Helping Young Americans Save for Retirement Act,” reintroduced on May 12 by Sen. Bill Cassidy, R.-La., and Sen. Tim Kaine, D-Va., would revise Internal Revenue Service code and the Employee Retirement Income Security Act of 1974, or ERISA, to make employer-sponsored 401(k) plans available to employees 18 and up. The change would also apply to other ERISA-governed retirement plans, including some pensions.
In a statement, Cassidy and Kaine said the bill is meant to expand access to these plans to young workers, arguing that the proposal is crucial, given the importance of saving for retirement early.
“Americans who don’t attend college and immediately enter the workforce should be given every chance to save for retirement,” Cassidy said. “This legislation empowers American workers, giving them more opportunities to plan for a secure retirement.”
The bill was previously introduced in November 2023 in the last Congress. Three other Democrats and two other Republicans joined as cosponsors, but it did not advance out of a Senate committee.
The lawmakers said the bill would also eliminate “barriers that discourage companies from offering these benefits to younger employees,” mentioning “costly provisions that would otherwise make covering younger workers expensive.” Namely, the bill would relax rules around mandatory audits for employers extending pension plans to individuals under 21.
Supporters of the Helping Young Americans Save for Retirement Act stress the importance of helping young people get into the routine of making consistent retirement contributions. Early retirement contributions can grow for many decades, supporting a more comfortable retirement for the next generation of savers.
Young adults who don’t have access to 401(k)s shouldn’t let that deter them from saving money when they’re able. Most savings and investment accounts do not require you to be 21. Even children can save with Roth IRAs and brokerage accounts if their parents help them open custodial accounts.
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Key Terms
- Helping Young Americans Save for Retirement Act
- 401(k) plans
- Young workers
- Employer-sponsored retirement plans
- ERISA
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