Save early and often is the advice often given to those seeking to save for retirement, and yet America’s youngest workers are frequently excluded from participating in workplace retirement plans that would help them follow that advice. Legislation introduced in the Senate this week could change that, however, allowing young workers to benefit from up to three years of additional retirement savings contributions and maximize the power of compounding.

On Wednesday, Sens. Bill Cassidy (R-LA) and Tim Kaine (D-VA) introduced the Helping Young Americans Save for Retirement Act aimed at removing barriers that discourage companies from offering employer-sponsored retirement plans to Americans under the age of 21. Although companies may allow employees under age 21 to participate in a 401(k) plan, they are not obligated to do so under the Employee Retirement Income Security Act of 1974, and many employers choose not to extend 401(k) eligibility to younger workers.

The bill would lower the participation age of ERISA-covered defined contribution plans to 18 years old and remove provisions that make it expensive to include younger workers in DC plans. Specifically, the bill delays ERISA provisions that require businesses to undergo mandatory audits if they allow employees younger than 21 to start contributing to their plan and exempts 18 to 20-year-old employees from testing related to retirement funds that would increase the cost of administering retirement plans for these employees. Covered plans would still be able to set a minimum age threshold up to 18 years old.


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