New Bill Extends 401(k) Access to Workers Under 21
The Helping Young Americans Save for Retirement Act would require plans to be open to workers 18 and older.
New legislation would allow employees under the age of 21 to participate in their company’s 401(k) plan.
The bill, the Helping Young Americans Save for Retirement Act, introduced by Rep. Brittany Pettersen, D-Colo., and Rep. Tim Walberg R-Mich., would help those 18 to 20 years old access employer-sponsored retirement plans.
Sen. Bill Cassidy, R-La., introduced companion legislation in November.
As it stands now, the Employee Retirement Income Security Act only requires employers who offer 401(k) plans to make the plans available to employees who are 21 and older. A company can offer a 401(k) plan to their employees under 21, but many do not due to high costs and excessive red tape, the lawmakers said.
“We have to make sure our financial regulations keep up with reality and give all employees an opportunity to build a stronger financial foundation from the start,” Petersen said in a statement.
“Empowering young Americans to start saving early not only fosters financial independence but also strengthens retirement security,” Walberg added.
The bill, according to the lawmakers, “will require employers to offer 401(k) plans to employees as young as 18 and will reduce regulatory burdens that price out employers from offering these retirement plans” to workers under 21.
The lawmakers pointed to a 2021 report by the Plan Sponsor Council of America finding that 40% of employers who offer retirement plans have a minimum age of 21 to participate. “Employees between the ages of 18 and 21 are missing out on additional savings and three years of compound interest,” according to the report.