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S. 3751: A bill to amend the Employee Retirement Income Security Act of 1964 and the Internal Revenue Code of 1986 to improve retirement plan coverage for part-time workers.


The text of the bill below is as of Mar 3, 2022 (Introduced).


II

117th CONGRESS

2d Session

S. 3751

IN THE SENATE OF THE UNITED STATES

March 3, 2022

(for himself and Mr. Scott of South Carolina) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions

A BILL

To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to improve retirement plan coverage for part-time workers.

1.

Improving coverage for part-time workers

(a)

Amendments to Employee Retirement Income Security Act of 1974

(1)

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 any employee described in section 410(b)(3) of the Internal Revenue Code of 1986.

(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)(i)(I), and (m)(2) of section 401 of the Internal Revenue Code of 1986 and section 410(b) of such Code.

(ii)

Time of participation

The rules of subsection (a)(4) shall apply with respect 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 the Internal Revenue Code of 1986.

(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, 2022, shall not be taken into account.

.

(2)

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.

For purposes of this paragraph, 12-month periods shall be determined in the same manner as under the last sentence of section 202(a)(3)(A), except that 12-month periods beginning before January 1, 2022, shall not be taken into account.

.

(b)

Conforming amendment to Internal Revenue Code of 1986

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)), 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 any employee described in subsection (b)(3).

(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)(i)(I), and (m)(2) of section 401.

(II)

Time of participation

The rules of paragraph (4) shall apply with respect 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, 2022, 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.

For purposes of this paragraph, 12-month periods shall be determined in the same manner as under paragraph (6)(D).

.

(c)

Pre-2021 service

Section 112(b) of the Setting Every Community Up for Retirement Enhancement Act of 2019 (26 U.S.C. 401 note) is amended by striking section 401(k)(2)(D)(ii) and inserting paragraphs (2)(D)(ii) and (15)(B)(iii) of section 401(k).

(d)

Effective date

The amendments made by this section shall apply to plan years beginning after the date which is 1 year after the date of the enactment of this Act.