Rep. Joseph Crowley, D-N.Y.introduced legislation Wednesday that's intended to aggressivelyimprove access to workplace retirement savings plans.

The Secure, Accessible, Valuable, Efficient Universal PensionAccounts, or SAVE UPs Act, requires small businesses with 10 ormore employees that don't already have a workplace savings programin place to enroll all employees in “individualized retirementaccounts,” according to a release from Crowley's office.

Under the proposed legislation, employees would automatically beenrolled in SAVE UPs account funds, with 3 percent of annualincome being deferred into the accounts.

That deferral rate will automatically increase by 0.5 percentannually until a deferral rate of 5 percent is reached. Employeeswill be allowed to opt out of deferring any salary, or set apredetermined deferral rate.

Employer non-elective contributions

The bill requires all eligible employers to make contributionsto the accounts at a rate of $0.50 cents of every hour worked byemployees. That would translate to $20 for a 40-hour workweek, and$1,000 annually for an employee that works 50 40-hour workweeks ina year.

Employers will be required to make that minimum contributionrequirement even if an employee elects to opt out of the plan,according to language and the bill, which was provided by arepresentative of Rep. Crowley's office.

The required employer contributions may not be counted as partof an hourly employees wage, according to language in the proposedlegislation. And if employers elect to contribute more than $0.50cents per hour worked, they will be required to do so equally forall employees. The employer contribution rate will be indexed forinflation and pegged to the national average wage index, which isused by the Social Security Administration.

The bill provides a tax credit up to the cost of employercontributions for 10 employees.

Accounts run through Treasury

If enacted, Crowley's bill establishes a trust fund operatedthrough the U.S. Treasury Department.

A board of trustees will oversee the trust, the funds of whichwill be available for distributions to retiring participantsirrespective to Congress' budgetary appropriation procedures.

The trust will create three separate accounts: the accumulation,annuity and reserve accounts. The accumulations account willconsist of contributions and investment earnings, which will fundthe separate annuity account, from which a lifetime income streamof annuitized retirement benefits would be paid to eachparticipant. The third and separate reserve account would beestablished to fund potential investment shortfalls in the annuityaccount.

Investment management

Assets in the three separate accounts would be invested by aboard of trustees assigned to each, which will be overseen bya SAVE UPs Board of Governors.

Individuals accounts will be credited an annual return equal tothe lessor of 6 percent or a return rate determined by the Board ofGovernors.

Ultimately, participants will be paid benefits in the form of anannuity, the amount of which will be based on credits in individualaccounts. Upon retirement, benefits cannot be reduced by more than5 percent during any year, “unless the fund is faced with asignificant financial hardship” and a greater benefit cut isauthorized by the Board of Governors.

Benefits will be in the form of a qualified joint and survivorannuity, as defined under the Employee Retirement Income SecurityAct: should a participant die before retirement, the benefits wouldbe paid to the surviving spouse.

Participants will have some latitude in choosing when to beginreceiving benefits—they can choose to begin drawing benefits afterage 62 but not after age 70.

Board of governors

The SAVE UPs board of governors will be established by thepresident, and will be comprised of five members that hadpreviously served as trustees to the three separate accounts, andsix other members appointed by the president. The appointment of achairman or chairwoman to will be subject to the U.S. Senate'sapproval.

The chairman or chairwoman's term will be limited to sevenyears, and no board member may serve more than two terms, whichwill be between one and six years.

Furthermore, five regional boards of trustees will beestablished, each with seven members, with appointments from theFederal Reserve Board, the Securities and Exchange Commission, andthe majority and minority leadership in both chambers of Congress.The president will appoint the chairman or chairwoman of eachregional board of trustees.

Employers' fiduciary duties

Employers' fiduciary duties will be limited to the “timelypayment in full” of elective employee contributions and nonelectiveemployer contributions.

Employers will not be liable for investment performance orbenefit distributions, the law stipulates.

Those responsibilities will fall on the boards of governors andtrustees, who will all be considered as fiduciaries, as defined bythe Employee Retirement Income Security Act.

So far, Crowley's proposed legislation has received support fromthe Pension Rights Center, a non-profit, Washington, D.C.-basedadvocacy for pension and retirement security and protections.

In as statement, Crowley said, “Every American should be able toretire with peace of mind and enjoy their golden years after alifetime of working.”

His proposed legislation would mean “workers will see a muchmore stable retirement picture — and that's good news for Americanfamilies,” added Crowley.

BenefitsPro