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Employees under the age of 21 could soon become eligible to participate in their company’s 401(k) plan under bipartisan legislation recently reintroduced in the House of Representatives. 

The Helping Young Americans Save for Retirement Act (H.R. 4718) was reintroduced July 23 by Rep. Brittany Pettersen (D-Colo.) and cosponsored by Rep. Michael Rulli (R-Ohio). It would amend the Employee Retirement Income Security Act (ERISA) to help more Americans ages 18 to 20 years old access employer-sponsored retirement plans.

The bill was jointly referred to the House Education and Workforce Committee (for purposes of ERISA), and the Ways and Means Committee (in relation to the Internal Revenue Code).

Companion legislation (S. 1707) was introduced in the Senate by Sens. Bill Cassidy (R-La.) and Tim Kaine (D-Va.) on May 12. Cassidy is chairman of the Senate Health, Education, Labor and Pensions Committee, where the Senate bill was referred (interestingly, it was not referred to the Senate Finance Committee).  

Currently, ERISA only requires employers that offer 401(k) plans to make the plans available to employees who are aged 21 or older. While a company can offer a 401(k) plan to their employees under 21 years old, many do not do so.  

If enacted, H.R. 4718 would require employers to offer 401(k) plans to employees as young as 18 and would seek to reduce regulatory burdens that price out employers from offering these retirement plans to workers under 21, the lawmakers noted.

To that end, the legislation stipulates that employees who are added to plans solely because of this bill would be omitted from mandatory audits for five years. This is designed to protect plans near audit thresholds from immediately being subject to new audit requirements because of their new plan enrollees, which would “otherwise increase the cost of administering retirement plans for these employees.”

Citing 2021 annual survey results from the Plan Sponsor Council of America, the lawmakers noted that 40% of plans currently have a minimum age requirement of 21. As a result, employees between the ages of 18 and 21 are missing out on additional savings and three years of compound interest, they further emphasized.   

“I started working at a young age and worked throughout middle school, high school, and college. But like many Coloradans, I didn’t have the chance to start saving for retirement until much later,” Pettersen said in introducing the bill. “We need to update our financial systems to reflect the real lives of working people and ensure that every young American has a fair shot at long-term financial security.”

“If you're old enough to fight for your country at 18, you should be able to fight for your financial future too,” added Rulli. “In the face of the largest generational wealth gap in American history, it’s time we give young people every tool to get ahead. Let them start saving, investing, and building real security. The sooner they start, the stronger America’s future becomes.”