Policy Agenda: Retirement and other portable benefits

Small Business Majority
Wed, 07/03/2019

The way Americans work and start a business is changing. People switch jobs more frequently throughout their careers and they are more likely than ever to work as a freelancer or solo entrepreneur than as a W-2 employee. While these flexible work arrangements can be positive, they can leave individuals without important benefits traditionally tied to one's employer.

This is why today's entrepreneurs and small business employees need a modernized benefits infrastructure that promotes quality jobs for those who do not work for large organizations. No one's financial security, ability to afford benefits like healthcare or capacity to take time off of work to care for a new child or sick family member should depend on their employment status.  

In order to support our evolving entrepreneurial community while ensuring small businesses have access to skilled workers, we recommend the following policies:

  • Support federal and state efforts to establish publicly-administered retirement savings programs ("Secure Choice") programs, such as CalSavers in California and similar programs in Connecticut, Illinois, Maryland and Oregon, to help more small businesses and their employees access retirement plans.
  • Allow independent entrepreneurs to access Secure Choice programs as has been done in California and Oregon, understanding many freelancers and self-employed individuals are unable to access traditional retirement benefits.
  • Support similar measures at the federal level. Numerous bills were introduced last Congress, such as the Automatic IRA Act, which proposed an auto-IRA arrangement for eligible employees and provide employers with fewer than 100 employees with a tax credit for the costs associated with establishing such an arrangement. Moving forward, legislative proposals should enroll employees automatically, but allow them to opt out, ensure employee contributions are portable between jobs and make participation open to the self-employed.
  • Expand eligibility for multiemployer retirement plans with appropriate fiduciary standards-for example, by passing bipartisan legislation such as the Retirement Enhancement and Savings Act (RESA) and the SECURE Act. In August 2018, the president issued an executive order to remove legal hurdles that made it harder for small businesses to band together to form multiple employer retirement savings plans (MEPs). However, it did not address concerns regarding fiduciary responsibility for small employers participating in these plans. If lawmakers want to encourage more small businesses to join MEPs, they must also protect small firms by passing legislation that creates a safe harbor for plan sponsors selecting an annuity provider.
  • Pass the FAMILY Act to establish a national program that would provide partial wage replacement for small business employees and the self-employed to access parental leave or to handle serious health conditions for themselves and family members.
  • Promote government and other programs to educate small businesses about paid family and medical leave insurance programs in California, New Jersey, Rhode Island, Washington state and Washington, D.C.
  • In the absence of a federal program, support continued legislative efforts in other states such as Colorado and Connecticut to establish paid family and medical leave insurance programs. Legislative proposals should include partial wage replacement for employees of all businesses with two or more employees, allow for participation from the self-employed and be fully administered by a state entity to avoid placing administrative burden on small businesses.