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The directive gives small businesses more freedom to link up to offer retirement savings benefits to employees through Association Retirement Plans. The goal is to help reduce the costs and burdens on the individual small businesses while giving the group more negotiating power.
"Many small businesses would like to offer retirement benefits to their employees, but are discouraged by the cost and complexity of running their own plans. Association Retirement Plans offer valuable retirement security to small businesses' employees through their retirement years," Acting Secretary of Labor Patrick Pizzella said in a statement.
The rule allows small businesses of employers in a city, county, state or multi-state metropolitan area to form an association to offer plans. It would also allow businesses within the same industry across the nation to band together as well.
According to the White House, 38 million Americans in the private sector do not have access to retirement plans through their employers. Workplace plans are a critical way many people can bolster their savings.
The administration believes the new directive will allow small businesses to offer plans to employees that rival those enjoyed by workers at large corporations.
The rule will be effective as of Sept. 30.
Last year, President Trump signed an executive order directing the Treasury and Labor Departments to consider issuing regulations or guidelines that would make work-based retirement programs more affordable for small businesses – including allowing them to band together to offer joint plans.
On average, about half of Americans may experience a shortfall covering essential expenses in retirement, according to Fidelity Investments. Nearly one-quarter of American workers don't expect to ever retire.
Meanwhile, lawmakers in the House of Representatives last month approved legislation called the SECURE Act, which includes a number of provisions that would help Americans save more for retirement. Among the key provisions are increasing access to retirement plans, extending the age limit by which people would be allowed to stash money into IRA accounts and delaying when people would be required to take required minimum distributions to 72, from 70 1/2.
That bill also includes provisions to make it easier for companies to offer multi-employer plans.
As previously reported by FOX Business, there is one proposed policy experts aren’t too excited about – the potential elimination of stretch-IRAs. The new proposal stipulates that most non-spouses who inherit an account must drain it within 10 years of the owner’s death, while the current law allows them to stretch it out over a lifetime.