Retirement Security Flexibility Act of 2021
This bill modifies the nondiscrimination requirements that apply to certain employer-sponsored 401(k) retirement plans that include automatic contribution arrangements.
To provide for an additional nondiscrimination safe harbor for 
                  automatic contribution arrangements.

    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 ``Retirement Security Flexibility Act 
of 2021''.

SEC. 2. ADDITIONAL NONDISCRIMINATION SAFE HARBOR FOR AUTOMATIC 
              CONTRIBUTION ARRANGEMENTS.

    (a) In General.--Subsection (k) of section 401 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(16) Special nonelective and matching contribution rules 
        for small employers.--
                    ``(A) In general.--In the case of a cash or 
                deferred arrangement maintained by an eligible employer 
                (as defined in section 408(p)(2)(C)(i)), for purposes 
                of paragraph (13), the arrangement shall be treated as 
                meeting the requirements of subparagraph (D) thereof if 
                under the arrangement, the total elective deferrals (as 
                defined in section 402(g)(3)(A)) with respect to any 
                employee do not exceed an amount equal to the 
                applicable percentage of the limitation otherwise 
                applicable under section 402(g).
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage with 
                respect to an arrangement is--
                            ``(i) 40 percent in the case of an 
                        arrangement which does not meet the 
                        requirements of paragraph (13)(D) and is not 
                        described in clause (ii) or (iii),
                            ``(ii) 60 percent in the case of an 
                        arrangement which is not described in clause 
                        (iii) and which would meet the requirements of 
                        paragraph (13)(D) if--
                                    ``(I) `equal to at least' were 
                                substituted for `equal to' in clause 
                                (i)(I) thereof,
                                    ``(II) `2 percent of compensation, 
                                and such matching contributions meet 
                                the requirement of subsection 
                                (m)(11)(B)' were substituted for `6 
                                percent of compensation' in clause 
                                (i)(I) thereof, and
                                    ``(III) `1 percent' were 
                                substituted for `3 percent' in clause 
                                (i)(II) thereof, and
                            ``(iii) 80 percent in the case of an 
                        arrangement which would meet the requirements 
                        of paragraph (13)(D) if--
                                    ``(I) `equal to at least' were 
                                substituted for `equal to' in clause 
                                (i)(I) thereof,
                                    ``(II) `4 percent of compensation, 
                                and such matching contributions meet 
                                the requirement of subsection 
                                (m)(11)(B)' were substituted for `6 
                                percent of compensation' in clause 
                                (i)(I) thereof, and
                                    ``(III) `2 percent' were 
                                substituted for `3 percent' in clause 
                                (i)(II) thereof.
                    ``(C) Reporting.--This paragraph shall apply to an 
                arrangement only if the plan includes with the reports 
                required under sections 6057 and 6058--
                            ``(i) the number of employees eligible to 
                        participate in the arrangement, and
                            ``(ii) the number of participants for the 
                        plan year.''.
    (b) Modification of Existing Automatic Contribution Safe Harbor.--
            (1) Qualified percentage.--
                    (A) In general.--Clause (iii) of section 
                401(k)(13)(C) of the Internal Revenue Code of 1986 is 
                amended by striking ``(10 percent during the period 
                described in subclause (I))''.
                    (B) Conforming amendments.--
                            (i) Subclause (I) of section 
                        401(k)(13)(C)(iii) of the Internal Revenue Code 
                        of 1986 is amended--
                                    (I) by striking ``3 percent'' and 
                                inserting ``3 percent, but not greater 
                                than 10 percent,'', and
                                    (II) by adding ``and'' at the end.
                            (ii) Subclause (II) of section 
                        401(k)(13)(C)(iii) of such Code is amended to 
                        read as follows:
                                    ``(II) during any subsequent plan 
                                year, the lesser of 1 percentage point 
                                higher than the percentage in effect 
                                for the preceding plan year or 8 
                                percent.''.
                            (iii) Section 401(k)(13)(C)(iii) of such 
                        Code is amended by striking subclauses (III) 
                        and (IV).
            (2) Automatic re-election.--Subparagraph (C) of section 
        401(k)(13) of such Code is amended by striking clause (iv) and 
        by adding at the end the following new clause:
                            ``(iv) Automatic re-election required.--The 
                        requirements of this subparagraph shall be 
                        treated as met only if, under the arrangement, 
                        every 3 years each employee--
                                    ``(I) who is eligible to 
                                participate in the arrangement, and
                                    ``(II) who is not participating, or 
                                is contributing less than 3 percent of 
                                compensation, at the time of 
                                determination,
                        is treated as having made the election 
                        described in clause (i) unless the employee 
                        makes a new election under clause (ii).''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan years 
        beginning after December 31, 2021.
            (2) Immediate automatic deferral for current employees not 
        required.--In the case of an employer who adopts a qualified 
        automatic contribution arrangement (as defined in section 
        401(k)(13)(B) of the Internal Revenue Code of 1986) after 
        December 31, 2021, solely for the first and second plan years 
        for which the arrangement is in effect, clauses (i) and (iv) of 
        section 401(k)(13)(C) of the Internal Revenue Code of 1986 (as 
        amended by this section) may be applied without taking into 
        account any employee who--
                    (A) is eligible to participate in the arrangement 
                (or a predecessor arrangement) immediately before the 
                date the arrangement goes into effect, and
                    (B) has an election in effect on such date either 
                to participate in the arrangement or to not participate 
                in the arrangement.
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Retirement Security Flexibility Act of 2021
A bill to provide for an additional nondiscrimination safe harbor for automatic contribution arrangements.
Retirement Security Flexibility Act of 2021
Sen. Young, Todd