In response to a request for information on June 5 from Senator Bill Cassidy (R-LA), ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, for ways to allow gig workers access to retirement benefits, the American Benefits Council (ABC) has responded. The employer group sent a letter, including suggestions introduced in the SECURE 2.0. legislation, as well as pooled employers plans (PEPs) established by Congress.
“The vast majority of independent workers prefer alternative work arrangements to traditional employment but would like access to portable workplace benefits,” said Sen. Cassidy, who is seeking information on ways to remove federal legal and regulatory barriers for the 27 million gig workers.
The ABC responded to the Senator with a 5-part plan to “enhance gig worker retirement security,” said the letter. The plan includes reference to each gig worker as a “sole proprietor,” and, as such, “can establish and participate in her own 401(k) plan, SIMPLE IRA or Simplified Pension …” said the letter. “The challenge is how to help gig workers access available tools because the reality is that it is not always easy for an individual on her own to adopt a retirement plan.”
Congress has opened the door to covering gig workers with a PEP, which is a single plan in which multiple employers participate. Therefore, a “gig worker is effectively a small business that can join a PEP,” said ABC. An employer cannot cover gig workers under its own retirement plan “because the workers are not employees,” wrote ABC, however, an employer could “make contributions” to a PEP on behalf of the workers.
The ABC is requesting that Congress direct the agencies to promote PEPs, since “the vast majority of workers and companies are not aware of how easy it is to set up PEPs …,” said the letter. “Another step that Congress can take it to direct the agencies to (1) promote these arrangements through their websites and outreach and (2) facilitate these arrangements through guidance providing appropriate relief from unnecessary regulatory burdens.”
More importantly, the ABC is requesting that Congress modify Form 5500 audit rules for a PEP to exempt participating employers with less than 100 participants in the PEP because if “a small employer with fewer than 100 participants joins a PEP with 100 or more participants the small employer loses its audit exemption,” wrote the ABC. More specifically, this exemption would be “parallel to the defined contribution groups exemption” provided in SECURE 2.0.
“This change would reduce audit costs and would mean that PEPs could become available to gig workers without having to charge them for part of the audit costs,” wrote the ABC. “This would be a major step forward for all PEPs and would make them realistically available to gig workers.”