ARA Crafts Proposal to Provide Retirement Plan Funding Relief for Small Businesses


The American Retirement Association has reached out to members of Congress with proposals to help alleviate cash flow issues for small businesses with retirement plans.

The ARA, whose broad membership consists of service providers and plan sponsors, strongly supports immediate defined contribution plan funding relief that will allow plan sponsors to continue to provide a retirement plan for their rank-and-file workers.

The proposed solution is based off a regulatory action taken in 2009 that enabled plan sponsors to temporarily cease safe harbor contributions. However, the proposed solution would require legislative action since it goes beyond safe harbor contributions.

Specifically, the American Retirement Association has proposed that:

  1. All plan sponsors with a defined contribution plan be allowed, on a prospective basis, to suspend their required employer contributions to their plan for 2020; and
  2. Plan sponsors with less than 500 participants in the plan be allowed to waive any employer contributions that have not yet been made to satisfy their 2019 obligations.

Plan sponsors that make the difficult decision to suspend contributions will be required to provide adequate notice to their plan participants. In addition, nondiscrimination testing failures will be waived for any plan sponsor that elects one or both of the above options.

This proposal will give plan sponsors the needed flexibility to maintain their retirement plan in the face of severe economic distress—and hopefully, a temporary cessation of employer money will provide relief to small businesses to ensure they can keep their business afloat, employees employed, health care benefits provided, and eventually a full return to providing important retirement contributions.


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