Section 1 Short title
This Act may be cited as the “Women's Retirement Protection Act”.
Women's Retirement Protection Act
A BILL
To amend the Employee Retirement Income Security Act of 1974 to provide for greater spousal protection under defined contribution plans, and for other purposes.
Sec. 2 Findings
Congress finds the following:
Approximately 25 percent of non-retired adults have no defined benefit plan or retirement savings, according to 2020 data from the Board of Governors of the Federal Reserve System.
In 2020, one-third of the private sector workforce did not have access to a retirement plan at the workplace, and only half of the workforce actually participated in a retirement plan.
Women’s retirement preparedness often lags significantly behind their male counterparts, resulting in the median income for women aged 65 and older in 2020 being just 83 percent of the median income of men aged 65 and older, including income from Social Security, pension plans, investments, and earnings.
Among people aged 75 and older, 13.2 percent of women live in poverty, while 8.8 percent of men live in poverty.
Women make up two-thirds of low-wage workers, even though they comprise less than half of all workers, and low-wage workers are less likely than other workers to participate in a retirement plan at work.
Because of the pay gap, women working full-time, year-round typically lose $406,280 over a 40-year career thereby requiring the average woman to work almost a decade longer than her male counterpart to make up that career wage gap. For Black and Latina women, the career wage gap is even larger at $964,400 and $1,163,920, respectively.
Due to the lower lifetime wages stemming from unequal pay and caregiving duties, the average Social Security benefit in 2019 for a woman age 65 or older was $13,505 a year, while for men such average benefit was $17,374 a year.
The COVID–19 pandemic has exacerbated the existing gender gap in retirement savings as women have been more likely to leave the workforce for caregiving. Women, especially women of color, have also been more likely to lose their jobs during the pandemic due to overrepresentation in industries severely hit by the pandemic.
Just 1 in 5 part-time workers who work a full year are eligible for a retirement plan, and women are almost twice as likely as men to work part-time.
While traditional defined benefit retirement plans have spousal protections, defined contribution retirement plans, which have become increasingly common, currently provide no similar spousal protections.
Every year, more than 1,200,000 couples get divorced in the United States. After the family home, retirement savings tends to be the largest asset to be divided in a divorce.
While fees and expenses associated with retirement plans have been in decline, participants have seen direct charges for processing qualified domestic relations orders increase significantly.
Sec. 3 Increasing spousal protection under defined contribution plans
Amendment of Employee Retirement Income Security Act of 1974—
In general— Part 2 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1051 et seq.), is amended by inserting after section 205 the following new section:
“205A. Additional spousal consent requirements
“(a) In general—Each individual account plan to which section 205 does not apply shall provide that, except as provided in subsections (c) and (d), no distribution may be made under the plan unless the spousal consent requirements of subsection (e) are met.
“(b) Coordination with section 205—Nothing in this section shall be construed to exempt an individual account plan from the requirements of paragraph (1)(B), (1)(C), or (2) of section 205(b) with respect to any participant.
“(c) Exceptions for certain distributions—Subsection (a) shall not apply to—
“(1) any distribution that is—
“(A) a minimum required distribution described in section 4974(b) of the Internal Revenue Code of 1986; or
“(B) permitted under section 203(e)(1) to be made without the consent of the participant;
“(2) any distribution in the form of a qualified joint and survivor annuity (as defined in section 205(d)(1)), a qualified optional survivor annuity (as defined in section 205(d)(2)), a qualified preretirement survivor annuity (as defined in section 205(e)), or a series of substantially equal periodic payments (not less frequently than annually) made for the joint lives (or life expectancies) of the participant and the participant's spouse; or
“(3) in the case of a participant who does not elect a form of benefit described in paragraph (2) under the plan or who is participating in a plan that does not provide such a form of benefit, any distribution of the participant's entire nonforfeitable accrued benefit if 50 percent of such accrued benefit is transferred to an individual retirement plan (as defined in section 7701(a)(37) of the Internal Revenue Code of 1986) of the spouse of the participant.
“(d) Exceptions for certain rollover contributions—Subsection (a) shall not apply to any distribution that is an eligible rollover distribution (as defined in section 402(f)(2)(A) of the Internal Revenue Code of 1986) made in the form of a direct trustee-to-trustee transfer within the meaning of section 401(a)(31) of the Internal Revenue Code of 1986—
“(1) to a plan to which this section or section 205 applies; or
“(2) to an individual retirement plan (as defined in section 7701(a)(37) of the Internal Revenue Code of 1986) if—
“(A) the beneficiary of such plan is the spouse of the participant, or the spousal consent requirements of subsection (e) are met with respect to any designation of 1 or more other beneficiaries; and
“(B) under the terms of the individual retirement plan, the beneficiary of such plan (whether the spouse or other beneficiary designated under paragraph (1)) may not be changed unless—
“(i) the spousal consent requirements of subsection (e) are met with respect to any such change, or
“(ii) the spousal consent under subparagraph (A) to the designation of a beneficiary other than the spouse expressly permits such designation to be changed without the further consent of the spouse.
“(e) Spousal consent requirements
“(1) In general—For purposes of this section, except as provided in paragraph (2), the spousal consent requirements of this subsection are met with respect to any distribution or any designation or change of beneficiary if—
“(A) the plan provides to each participant, within a reasonable period of time before such distribution or designation or change of beneficiary is made and consistent with such regulations as the Secretary of the Treasury may prescribe, a written explanation of the rights of the participant and the participant's spouse under this section;
“(B) the spouse of the participant consents in writing to the distribution or designation or change of beneficiary;
“(C) in the case of a distribution, the written consent under subparagraph (B) is made during the consent period; and
“(D) the written consent under subparagraph (B)—
“(i) acknowledges the effect of such distribution or designation or change of beneficiary; and
“(ii) is witnessed by a plan representative or a notary public.
“(2) Exceptions—The requirements of paragraph (1) (other than subparagraph (A) thereof) shall not apply with respect to any distribution or designation or change of beneficiary if a participant establishes to the satisfaction of the plan administrator that—
“(A) there is no spouse;
“(B) the participant and the participant's spouse have not been married for at least 1 year as of the date of the distribution or designation or change of beneficiary; or
“(C) such consent cannot be obtained because—
“(i) the spouse cannot be located;
“(ii) due to exceptional circumstances, requiring the participant to seek the spouse’s consent would be inappropriate; or
“(iii) of such other circumstances as the Secretary of the Treasury, in consultation with the Secretary of Labor, may by regulations prescribe.
“(3) Consent limited to spouse and event—Any written consent by a spouse under paragraph (1), or the establishment by a participant that an exception under paragraph (2) applies with respect to a spouse, shall be effective only with respect to that spouse and to the distribution or designation or change of beneficiary to which it relates.
“(4) Consent period—For purposes of this subsection, the term consent period means, with respect to any distribution—
“(A) the 90-day period immediately preceding the date of such distribution; or
“(B) such other period as the Secretary of the Treasury may provide.
“(f) Discharge of plan from liability—Rules similar to the rules of section 205(c)(6) shall apply for purposes of this section.”
Clerical amendment— The table of sections of part 2 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 205 the following new item:
Right of action— Section 502(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132), is amended—
by striking “or” at the end of paragraph (10);
by striking the period at the end of paragraph (11) and inserting “; or”; and
by adding at the end the following new paragraph:
“(12) by an individual for appropriate relief in the case of a violation of the individual's rights under section 205A.”
Parallel amendment to section 205— Section 205(c)(2)(B) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1055(c)(2)(B)), is amended by inserting “, because due to exceptional circumstances, requiring the participant to seek the spouse's consent would be inappropriate” after “located”.
Conforming amendment to Internal Revenue Code of 1986— Section 401(a) of the Internal Revenue Code of 1986 is amended by inserting after paragraph (17) the following new paragraph:
“(18) Additional spousal consent requirements
“(A) In general—In the case of a defined contribution plan to which paragraph (11) does not apply, except as provided in subsections (c) and (d), a trust forming part of such plan shall not constitute a qualified trust under this section unless no distribution may be made under the plan unless the spousal consent requirements of subparagraph (E) are met.
“(B) Coordination with paragraph (11)—Nothing in this paragraph shall be construed to exempt a defined contribution plan from the requirements of subparagraph (B)(ii), (B)(iii), or (C) of paragraph (11) with respect to any participant.
“(C) Exceptions for certain distributions—Subparagraph (A) shall not apply to—
“(i) any distribution that is—
“(I) a minimum required distribution described in section 4974(b), or
“(II) permitted under section 411(a)(11) to be made without the consent of the participant,
“(ii) any distribution in the form of a qualified joint and survivor annuity (as defined in section 417(b)), a qualified optional survivor annuity (as defined in section 417(g)), a qualified preretirement survivor annuity (as defined in section 417(c)), or a series of substantially equal periodic payments (not less frequently than annually) made for the joint lives (or life expectancies) of the participant and the participant's spouse, or
“(iii) in the case of a participant who does not elect a form of benefit described in clause (ii) under the plan or who is participating in a plan that does not provide such a form of benefit, any distribution of the participant's entire nonforfeitable accrued benefit if 50 percent of such accrued benefit is transferred to an individual retirement plan of the spouse of the participant.
“(D) Exceptions for certain rollover contributions—Subparagraph (A) shall not apply to any distribution, involving a participant who has a spouse, that is an eligible rollover distribution (as defined in section 402(f)(2)(A)) made in the form of a direct trustee-to-trustee transfer within the meaning of paragraph (31)—
“(i) to a plan to which this paragraph or paragraph (11) applies; or
“(ii) to an individual retirement plan if—
“(I) the beneficiary of such plan is the spouse of the participant, or the spousal consent requirements of subparagraph (E) are met with respect to any designation of 1 or more other beneficiaries; and
“(II) under the terms of the individual retirement plan, the beneficiary of such plan (whether the spouse or other beneficiary designated under clause (i)) may not be changed unless—
“(aa) the spousal consent requirements of subparagraph (E) are met with respect to any such change, or
“(bb) the spousal consent under subclause (I) to the designation of a beneficiary other than the spouse expressly permits such designation to be changed without the further consent of the spouse.
“(E) Spousal consent requirements
“(i) In general—For purposes of this paragraph, except as provided in clause (ii), the spousal consent requirements of this subparagraph are met with respect to any distribution or any designation or change of beneficiary if—
“(I) the plan provides to each participant, within a reasonable period of time before such distribution or designation or change of beneficiary is made and consistent with such regulations as the Secretary may prescribe, a written explanation of the rights of the participant and the participant's spouse under this paragraph,
“(II) the spouse of the participant consents in writing to the distribution or designation or change of beneficiary,
“(III) in the case of a distribution, the written consent under subclause (II) is made during the consent period, and
“(IV) the written consent under subclause (ii)—
“(aa) acknowledges the effect of such distribution or designation or change of beneficiary, and
“(bb) is witnessed by a plan representative or a notary public.
“(ii) Exceptions under section 417(a)(2)(B) to apply—The requirements of clause (i) (other than subclause (I) thereof) shall not apply with respect to any distribution or designation or change of beneficiary if a participant establishes to the satisfaction of the plan administrator that—
“(I) there is no spouse,
“(II) the participant and the participant's spouse have not been married for at least 1 year as of the date of the distribution or designation or change of beneficiary, or
“(III) such consent cannot be obtained because—
“(aa) the spouse cannot be located, or
“(bb) of such other circumstances as the Secretary, in consultation with the Secretary of Labor, may by regulations prescribe.
“(iii) Consent limited to spouse and event—Any written consent by a spouse under clause (i), or the establishment by a participant that an exception under clause (ii) applies with respect to a spouse, shall be effective only with respect to that spouse and to the distribution or designation or change of beneficiary to which it relates.
“(iv) Consent period—For purposes of this subparagraph, the term consent period means, with respect to any distribution—
“(I) the 90-day period immediately preceding the date of such distribution, or
“(II) such other period as the Secretary may provide.”
Sec. 4 Improving coverage for part-time workers
Amendment of Employee Retirement Income Security Act of 1974—
In general— Section 202 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1052) is amended by adding at the end the following new subsection:
“(c) Special rule for certain part-Time employees
“(1) In general—A pension plan that includes either a qualified cash or deferred arrangement (as defined in section 401(k) of the Internal Revenue Code of 1986) or a salary reduction agreement (as described in section 403(b) of such Code) shall not require, as a condition of participation in the arrangement or agreement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of—
“(A) the period permitted under subsection (a)(1) (determined without regard to subparagraph (B)(i) thereof); or
“(B) the first 24-month period—
“(i) consisting of 2 consecutive 12-month periods during each of which the employee has at least 500 hours of service; and
“(ii) by the close of which the employee has attained the age of 21.
“(2) Exception—Paragraph (1)(B) shall not apply to employees who are included in a unit of employees covered by an agreement which the Secretary finds to be a collective bargaining agreement between employee representatives and 1 or more employers, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.
“(3) Coordination with other rules
“(A) In general—In the case of employees who are eligible to participate in the arrangement or agreement solely by reason of paragraph (1)(B):
“(i) Exclusions—An employer may elect to exclude such employees from the application of subsections (a)(4), (k)(3), (k)(12), (k)(13), (k)(15)(B)(iv), (k)(15)(B)(i)(I), and (m)(2) of section 401 of such Code and section 410(b) of such Code.
“(ii) Time of participation—The rules of subsection (a)(4) shall apply to such employees.
“(B) Top-heavy rules—An employer may elect to exclude all employees who are eligible to participate in a plan maintained by the employer solely by reason of paragraph (1)(B) from the application of the vesting and benefit requirements under subsections (b) and (c) of section 416 of such Code.
“(4) 12-month period—For purposes of this subsection, 12-month periods shall be determined in the same manner as under the last sentence of subsection (a)(3)(A), except that 12-month periods beginning before January 1, 2021, shall not be taken into account.”
Vesting— Section 203(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:
“(4) Part-time employees—For purposes of determining whether an employee who is eligible to participate in a qualified cash or deferred arrangement or a salary reduction agreement under a plan solely by reason of section 202(c)(1)(B) has a nonforfeitable right to employer contributions—
“(A) except as provided in subparagraph (B), each 12-month period for which the employee has at least 500 hours of service shall be treated as a year of service;
“(B) paragraph (3) shall be applied by substituting “at least 500 hours of service” for “more than 500 hours of service” in subparagraph (A) thereof; and
“(C) 12-month periods occurring before the 24-month period described in section 202(c)(1)(B) shall not be treated as years of service.”
Penalty— Section 502 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132), is amended by adding at the end the following new subsection:
“(n) Requirements relating to part-Time employees—In the case of a plan that fails to permit participation as required by section 202(c), the Secretary may assess a civil penalty against the plan sponsor in an amount equal to $10,000 per year per employee to whom such failure relates. The Secretary may, in the Secretary’s sole discretion, waive or reduce the penalty under this subsection if the Secretary determines that the plan sponsor acted reasonably and in good faith.”
Conforming amendments to Internal Revenue Code of 1986—
In general— Section 410(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraphs:
“(6) Special rule for certain part-time employees
“(A) In general—In the case of a plan that includes either a qualified cash or deferred arrangement (as defined in section 401(k)) or a salary reduction agreement (as described in section 403(b)), a trust of which such plan is a part shall not constitute a qualified trust under section 401(a) if the plan requires, as a condition of participation in the plan or arrangement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of—
“(i) the period permitted under paragraph (1) (determined without regard to subparagraph (B)(i) thereof), or
“(ii) the first 24-month period—
“(I) consisting of 2 consecutive 12-month periods during each of which the employee has at least 500 hours of service, and
“(II) by the close of which the employee has attained the age of 21.
“(B) Exception—Subparagraph (A)(ii) shall not apply to employees who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and 1 or more employers, if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.
“(C) Coordination with other rules
“(i) In general—In the case of employees who are eligible to participate in the arrangement or agreement solely by reason of subparagraph (A)(ii)—
“(I) Exclusions—An employer may elect to exclude such employees from the application of subsection (b) and of subsections (a)(4), (k)(3), (k)(12), (k)(13), (k)(15)(B)(iv), (k)(15)(B)(i)(I), and (m)(2) of section 401.
“(II) Time of participation—The rules of paragraph (4) shall apply to such employees.
“(ii) Top-heavy rules—An employer may elect to exclude all employees who are eligible to participate in a plan maintained by the employer solely by reason of subparagraph (A)(ii) from the application of the vesting and benefit requirements under subsections (b) and (c) of section 416.
“(D) 12-month period—For purposes of this paragraph, 12-month periods shall be determined in the same manner as under the last sentence of paragraph (3)(A), except that 12-month periods beginning before January 1, 2021, shall not be taken into account.
“(7) Part-time employees—For purposes of determining whether an employee who is eligible to participate in a qualified cash or deferred arrangement or a salary reduction agreement under a plan solely by reason of paragraph (6)(A)(ii) has a nonforfeitable right to employer contributions—
“(A) except as provided in subparagraph (B), each 12-month period for which the employee has at least 500 hours of service shall be treated as a year of service,
“(B) section 411(a)(6) shall be applied by substituting “at least 500 hours of service” for “more than 500 hours of service” in subparagraph (A) thereof, and
“(C) 12-month periods occurring before the 24-month period described in paragraph (6)(A)(ii) shall not be treated as years of service.”
Sec. 5 Effective dates
Increasing spousal protection under defined contribution plans— Except as provided in subsections (c) and (d), the amendments made by section 3 shall apply to distributions and rollover contributions made in plan years beginning after the date that is 1 year after the date of the enactment of this Act.
Ensuring coverage for long-Term part-Time workers— Except as provided in subsections (c) and (d), the amendments made by section 4 shall apply to plan years beginning after December 31, 2021.
Collective bargaining agreements— In the case of a plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers ratified before the date of the enactment of this Act, the amendments made by sections 3 and 4 shall not apply to distributions or rollover contributions on behalf of employees covered by any such agreement for plan years beginning before the earlier of—
the later of—
the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof on or after such date of the enactment); or
the day after the date specified in subsection (a) or (b), whichever is applicable; or
the date that is 3 years after the applicable day described in paragraph (1)(B).
Provisions relating to plan amendments—
In general— If this paragraph applies to any plan or contract amendment, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(C).
Amendments to which paragraph (1) applies—
In general— Paragraph (1) shall apply to any amendment to any plan or annuity contract which is made—
pursuant to the amendments made by section 3 or 4 or pursuant to any regulation issued under either such section; and
on or before the last day of the first plan year beginning on or after the date that is 3 years after the applicable day described in subsection (c)(1)(B).
Conditions— Subparagraph (A) shall not apply to any amendment unless—
the plan or contract is operated as if such plan or contract amendment were in effect for the period described in subparagraph (C); and
such plan or contract amendment applies retroactively for such period.
Period described— The period described in this subparagraph is the period—
beginning on the effective date specified by the plan; and
ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted).
Sec. 6 Access to independent consumer information and understanding
Definitions— In this section—
the term consumer means any person who purchases or acquires any goods, products, services, or credit related to the retirement or later life economic security of the consumer; and
the term financial product or service provider means any person who engages in the business of providing any retirement financial product or service to any consumer.
Required link to consumer awareness information— In any offer for the sale, exchange, or other transfer of a retirement financial product or service to a consumer carried out by a financial product or service provider, such provider shall provide, in a manner consistent with subsection (c), an easily accessible link to the website of the Bureau of Consumer Financial Protection (referred to in this section as the “CFPB”) at which the consumer may access information, literature, guides, programs, tools, strategies, or any other resource produced by the CFPB or other Federal agency relating to retirement planning or later life economic security.
Determination— In order to ensure that the requirement under subsection (b) is effectively carried out, the Financial Literacy and Education Commission shall determine and publish on its website the appropriate link to the CFPB’s website for access to the CFPB’s and other Federal agencies’ consumer education materials, the preferred format of such link, and any accompanying description of the CFPB and the consumer education materials associated with such link.
Sec. 7 Grants to promote financial literacy for women
Authorization of grant awards— The Secretary of Labor, acting through the Director of the Women's Bureau, shall award grants on a competitive basis to eligible entities to enable such entities to improve the financial literacy of women who are working age or in retirement, to increase the likelihood of the women realizing a secure and stable retirement.
Definition of eligible entity— In this section, the term eligible entity means a community-based organization with proven experience and expertise in serving working-age or retired women.
Application— An eligible entity that desires to receive a grant under this section shall submit an application to the Secretary of Labor at such time, in such manner, and accompanied by such information as such Secretary may require.
Minimum grant amount— The Secretary of Labor shall award grants under this section in amounts of not less than $250,000.
Use of funds— An eligible entity that receives a grant under this section shall use the grant funds to develop and implement financial literacy education, and related activities including outreach, awareness building, and counseling to increase women's knowledge of retirement planning and consumer, economic, and personal financial concepts.
Authorization of appropriations— There is authorized to be appropriated to carry out this section $100,000,000 for fiscal year 2022 and each succeeding fiscal year.
Sec. 8 Grants to assist low-income women and survivors of domestic violence in obtaining qualified domestic relations orders
Authorization of grant awards— The Secretary of Labor, acting through the Director of the Women’s Bureau and in conjunction with the Assistant Secretary of the Employee Benefits Security Administration, shall award grants, on a competitive basis, to eligible entities to enable such entities to assist low-income women and survivors of domestic violence in obtaining qualified domestic relations orders (as defined in section 206(d)(3)(B)(i) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)(B)(i))), and ensuring that those women actually obtain the benefits to which they are entitled through those orders.
Definition of eligible entity— In this section, the term eligible entity means a community-based organization with proven experience and expertise in serving women and the financial and retirement needs of women.
Application— An eligible entity that desires to receive a grant under this section shall submit an application to the Secretary of Labor at such time, in such manner, and accompanied by such information as the Secretary of Labor may require.
Minimum grant amount— The Secretary of Labor shall award grants under this section in amounts of not less than $250,000.
Use of funds— An eligible entity that receives a grant under this section shall use the grant funds to develop programs to offer help to low-income women or survivors of domestic violence who need assistance in preparing, obtaining, and effectuating a qualified domestic relations order.
Authorization of appropriations— There is authorized to be appropriated to carry out this section $100,000,000 for fiscal year 2022 and each succeeding fiscal year.