Starter-K Act of 2022
Bill: S.3955 | Sponsor: Sen. Barrasso, John (R-WY)
Policy area: Taxation

Summary:
Starter-K Act of 2022
This bill allows employers who do not provide a retirement plan to establish a starter 401(k) deferral-only arrangement for plan years beginning after 2022. The bill defines starter 401(k) deferral-only arrangement as any cash or deferred arrangement that meets specified automatic deferral requirements, contribution limitations, and notice requirements. Such arrangements also allow catch-up contributions for individuals age 50 and over and exempt such employers from complying with certain participation and discrimination standards.

To amend the Internal Revenue Code of 1986 to provide for starter 
401(k)s for employers with no retirement plans, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Starter-K Act of 2022''.

SEC. 2. STARTER 401(K) PLANS FOR EMPLOYERS WITH NO RETIREMENT PLAN.

    (a) In General.--Section 401(k) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(16) Starter 401(k) deferral-only plans for employers 
        with no retirement plan.--
                    ``(A) In general.--A starter 401(k) deferral-only 
                arrangement maintained by an eligible employer shall be 
                treated as meeting the requirements of paragraph 
                (3)(A)(ii).
                    ``(B) Starter 401(k) deferral-only arrangement.--
                For purposes of this paragraph, the term `starter 
                401(k) deferral-only arrangement' means any cash or 
                deferred arrangement which meets--
                            ``(i) the automatic deferral requirements 
                        of subparagraph (C),
                            ``(ii) the contribution limitations of 
                        subparagraph (D), and
                            ``(iii) the requirements of subparagraph 
                        (E) of paragraph (13).
                    ``(C) Automatic deferral.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the arrangement, 
                        each employee eligible to participate in the 
                        arrangement is treated as having elected to 
                        have the employer make elective contributions 
                        in an amount equal to a qualified percentage of 
                        compensation.
                            ``(ii) Election out.--The election treated 
                        as having been made under clause (i) shall 
                        cease to apply with respect to any employee if 
                        such employee makes an affirmative election--
                                    ``(I) to not have such 
                                contributions made, or
                                    ``(II) to make elective 
                                contributions at a level specified in 
                                such affirmative election.
                            ``(iii) Qualified percentage.--For purposes 
                        of this subparagraph, the term `qualified 
                        percentage' means, with respect to any 
                        employee, any percentage determined under the 
                        arrangement if such percentage is applied 
                        uniformly and is not less than 3 or more than 
                        15 percent.
                    ``(D) Contribution limitations.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the 
                        arrangement--
                                    ``(I) the only contributions which 
                                may be made are elective contributions 
                                of employees described in subparagraph 
                                (C), and
                                    ``(II) the aggregate amount of such 
                                elective contributions which may be 
                                made with respect to any employee for 
                                any calendar year shall not exceed 
                                $6,000.
                            ``(ii) Cost-of-living adjustment.--In the 
                        case of any calendar year beginning after 
                        December 31, 2023, the $6,000 amount under 
                        clause (i) shall be adjusted in the same manner 
                        as under section 402(g)(4), except that `2022' 
                        shall be substituted for `2005'.
                            ``(iii) Cross reference.--For catch-up 
                        contributions for individuals age 50 or over, 
                        see section 414(v)(2)(B)(ii).
                    ``(E) Eligible employer.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `eligible 
                        employer' means any employer which, during the 
                        first plan year of the cash or deferred 
                        arrangement described in subparagraph (B), does 
                        not maintain any other qualified plan. An 
                        employer treated as an eligible employer under 
                        the preceding sentence shall be treated as an 
                        eligible employer with respect to the 
                        arrangement for any subsequent plan year 
                        without regard to whether it maintains another 
                        qualified plan.
                            ``(ii) Qualified plan.--The term `qualified 
                        plan' means a plan, contract, pension, account, 
                        or trust described in subparagraph (A) or (B) 
                        of paragraph (5) of section 219(g) (determined 
                        without regard to the last sentence of such 
                        paragraph (5)).''.
    (b) Certain Annuity Contracts.--Subsection (b) of section 403 of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following new paragraph:
            ``(15) Safe harbor deferral-only plans for employers with 
        no retirement plan.--
                    ``(A) In general.--A safe harbor deferral-only plan 
                maintained by an eligible employer shall be treated as 
                meeting the requirements of paragraph (12).
                    ``(B) Safe harbor deferral-only plan.--For purposes 
                of this paragraph, the term `safe harbor deferral-only 
                plan' means any plan which meets--
                            ``(i) the automatic deferral requirements 
                        of subparagraph (C),
                            ``(ii) the contribution limitations of 
                        subparagraph (D), and
                            ``(iii) the requirements of subparagraph 
                        (E) of section 401(k)(13).
                    ``(C) Automatic deferral.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the plan, each 
                        eligible employee is treated as having elected 
                        to have the employer make elective 
                        contributions in an amount equal to a qualified 
                        percentage of compensation.
                            ``(ii) Election out.--The election treated 
                        as having been made under clause (i) shall 
                        cease to apply with respect to any eligible 
                        employee if such eligible employee makes an 
                        affirmative election--
                                    ``(I) to not have such 
                                contributions made, or
                                    ``(II) to make elective 
                                contributions at a level specified in 
                                such affirmative election.
                            ``(iii) Qualified percentage.--For purposes 
                        of this subparagraph, the term `qualified 
                        percentage' means, with respect to any 
                        employee, any percentage determined under the 
                        plan if such percentage is applied uniformly 
                        and is not less than 3 or more than 15 percent.
                    ``(D) Contribution limitations.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the plan--
                                    ``(I) the only contributions which 
                                may be made are elective contributions 
                                of eligible employees, and
                                    ``(II) the aggregate amount of such 
                                elective contributions which may be 
                                made with respect to any employee for 
                                any calendar year shall not exceed 
                                $6,000.
                            ``(ii) Cost-of-living adjustment.--In the 
                        case of any calendar year beginning after 
                        December 31, 2023, the $6,000 amount under 
                        clause (i) shall be adjusted in the same manner 
                        as under section 402(g)(4), except that `2022' 
                        shall be substituted for `2005'.
                            ``(iii) Cross reference.--For catch-up 
                        contributions for individuals age 50 or over, 
                        see section 414(v)(2)(B)(ii).
                    ``(E) Eligible employer.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `eligible 
                        employer' means any employer which, during the 
                        first plan year of the plan described in 
                        subparagraph (B), does not maintain any other 
                        qualified plan. An employer treated as an 
                        eligible employer under the preceding sentence 
                        shall be treated as an eligible employer with 
                        respect to the plan for any subsequent plan 
                        year without regard to whether it maintains 
                        another qualified plan.
                            ``(ii) Qualified plan.--The term `qualified 
                        plan' means a plan, contract, pension, account, 
                        or trust described in subparagraph (A) or (B) 
                        of paragraph (5) of section 219(g) (determined 
                        without regard to the last sentence of such 
                        paragraph (5)).
                    ``(F) Eligible employee.--For purposes of this 
                paragraph, the term `eligible employee' means any 
                employee of the employer other than an employee who is 
                permitted to be excluded under paragraph (12)(A).''.
    (c) Catch-Up Contributions for Individuals Age 50 and Over.--
            (1) Section 414(v)(2)(B) of the Internal Revenue Code of 
        1986 is amended by inserting ``, 401(k)(16), 403(b)(15),'' 
        after ``401(k)(11)'' each place it appears.
            (2) Section 414(v)(3)(B) of such Code is amended--
                    (A) by inserting ``, 401(k)(16)'' after 
                ``401(k)(11)'', and
                    (B) by inserting ``, 403(b)(15)'' after 
                ``403(b)(12)''.
    (d) Simplified Reporting.--Section 104(a)(2)(A) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1024(a)(2)) is 
amended by striking ``or'' at the end of clause (i), by redesignating 
clause (ii) as clause (iii), and by inserting after clause (i) the 
following new clause:
                            ``(ii) is a starter 401(k) deferral-only 
                        arrangement described in section 401(k)(16)(B) 
                        of the Internal Revenue Code of 1986 or a safe 
                        harbor deferral-only plan described in section 
                        403(b)(15) of such Code; or''.
    (e) Starter and Safe Harbor Plans Not Treated as Top-Heavy Plans.--
Subparagraph (H) of section 416(g)(4) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``arrangements'' in the heading and 
        inserting ``arrangements or plans'',
            (2) by striking ``, and'' at the end of clause (i) and 
        inserting ``and matching contributions with respect to which 
        the requirements of section 401(m)(11) or 401(m)(12) are met, 
        or'', and
            (3) by striking clause (ii) and inserting after clause (i) 
        the following new clause:
                            ``(ii) a starter 401(k) deferral-only 
                        arrangement described in section 401(k)(16)(B) 
                        or a safe harbor deferral-only plan described 
                        in section 403(b)(15).''.
    (f) Plans Not Subject to Employee Retirement Income Security Act of 
1974.--Applicable to plan years beginning after December 31, 2022, the 
Secretary of Labor shall update Field Assistance Bulletin No. 2010-01 
to specify that the hiring of a new plan administrator or third-party 
administrator by a plan which is not previously subject to title I of 
the Employee Retirement Income Security Act of 1974 shall not cause 
such plan to be subject to such title.
    (g) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2022.
                                 <all>