Section 1 Short title
This Act may be cited as the “Small Business Employee Retirement Savings Act of 2016”.
Small Business Employee Retirement Savings Act of 2016
A BILL
To amend the Internal Revenue Code of 1986 to encourage small businesses to enroll their employees in retirement savings options, and for other purposes.
Sec. 2 Increase in credit limitation for small employer pension plan startup costs
In general— Paragraph (1) of section 45E(b) of the Internal Revenue Code of 1986 is amended to read as follows:
“(1) for the first credit year and each of the 2 taxable years immediately following the first credit year, the greater of—
“(A) $500, or
“(B) the lesser of—
“(i) $250 for each employee of the eligible employer who is not a highly compensated employee (as defined in section 415(q)) and who is eligible to participate in the eligible employer plan maintained by the eligible employer, or
“(ii) $5,000, and”
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2015.
Sec. 3 Credit for small employers adopting auto-enrollment options
In general— Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
“45S. Auto-enrollment option for retirement savings options provided by small employers
“(a) In general—For purposes of section 38, in the case of a small employer, the retirement auto-enrollment credit determined under this section is an amount equal to $500 for any taxable year in the credit period.
“(b) Credit period—For purposes of subsection (a)—
“(1) In general—The credit period with respect to any small employer is the 3-taxable-year period beginning with the first taxable year for which the employer includes an eligible automatic contribution arrangement (as defined in section 414(w)(3)) in a qualified retirement plan (as defined in section 4974(c)) sponsored by the employer, but only if the plan maintains such arrangement throughout such period.
“(2) Credit permissible in start-up year—The first taxable year in the credit period may be the same taxable year as the first credit year (as defined in section 45E(d)(3)).
“(3) Employer must remain small employer—Notwithstanding paragraph (1), the credit period with respect to any small employer shall end with the earlier of—
“(A) the last taxable year in such period determined without regard to this paragraph, or
“(B) the last taxable year in which such employer is a small employer.
“(c) Small employer—For purposes of this section, the term small employer means any employer for any taxable year if the number of employees employed by such employer during such taxable year does not exceed 100. All employers treated as a single employer under section (a) or (b) of section 52 shall be treated as a single employer for purposes of this section.”
Credit To be part of general business credit— Subsection (b) of section 38 of the Internal Revenue Code of 1986 is amended by striking “plus” at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting “, plus”, and by adding at the end the following new paragraph:
“(37) in the case of a small employer (as defined in section 45S(c)), the retirement auto-enrollment credit determined under section 45S(a).”
Clerical amendment— The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by section 2, is amended by inserting after the item relating to section 45R the following new item:
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.
Sec. 4 Removal of 10 percent cap after first plan year from automatic enrollment safe harbor
In general— Clause (iii) of section 401(k)(13)(C) of the Internal Revenue Code of 1986 is amended by striking “, does not exceed 10 percent, and is at least” and inserting “and is”.
Conforming amendments—
Subclause (I) of section 401(k)(13)(C)(iii) of the Internal Revenue Code of 1986 is amended by striking “3 percent” and inserting “at least 3 percent, but not greater than 10 percent,”.
Subclause (II) of section 401(k)(13)(C)(iii) of such Code is amended by striking “4 percent” and inserting “at least 4 percent”.
Subclause (III) of section 401(k)(13)(C)(iii) of such Code is amended by striking “5 percent” and inserting “at least 5 percent”.
Subclause (IV) of section 401(k)(13)(C)(iii) of such Code is amended by striking “6 percent” and inserting “at least 6 percent”.
Effective date— The amendments made by this section shall apply to plan years beginning after the date of enactment of this Act.