On July 11, 2018, the SIMPLE Plan Modernization Act (S.3197) was introduced by a bi-partisan effort to promote savings on behalf of small business employees by improving SIMPLE retirement accounts and easing transition to 401(k) plans.
Key proposed changes include:
- A raise to the deferral limit from $12,500 to $15,500 and a raise in the catch- up deferral limit from $3,000 to $4,500, for businesses with 1 to 25 qualifying employees.
- Allowing larger businesses with 26 to 100 employees to elect an option of higher deferral limits while also increasing the employer contribution by one percent if the higher deferral limits are elected.
- Making the limit increases unavailable if the employer has had another defined contribution plan within the past three years.
- Modernizing the form filing requirements.
- Modification of the transition rules from SIMPLE IRA plans to other retirement plans (e.g., 401(k) plans) to facilitate and encourage such transitions.
Finally, the bill requests that the Treasury study the use of SIMPLE IRA plans and to report their findings to Congress, along with any further recommendations.
If this bill is approved, the updates would be effective and apply to taxable years beginning after December 31, 2018.
See the bill here: S.3197 – SIMPLE Plan Modernization Act