Legislative Change on the Horizon: What Plan Sponsors Need to Know
As we move into the second half of 2025, plan sponsors and retirement industry professionals are closely monitoring several legislative proposals that could shape the future of 401(k) plans in the years ahead. Two bills introduced in the Senate this year — the Helping Young Americans Save for Retirement Act and the Protecting Americans’ Retirement Savings Act — highlight the federal government’s ongoing efforts to expand access to retirement plans while safeguarding the integrity of these investments.
Helping Young Americans Save for Retirement
The Helping Young Americans Save for Retirement Act (S.1707) was introduced on May 12, 2025, by Senators Bill Cassidy (R-LA) and Tim Kaine (D-VA). This bipartisan legislation aims to amend the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 to make it easier for younger workers to start saving for retirement. One of the primary features of the bill is its proposal to lower the minimum participation age for ERISA-covered defined contribution plans from 21 to 18.
Under current rules, employers can require employees to wait until they are at least 21 years old before participating in workplace retirement plans. This bill seeks to change that by allowing employees as young as 18 to start contributing, provided they complete two consecutive 12-month periods with at least 500 hours of service each. The intent is to give younger Americans more time to accumulate retirement savings and to establish good financial habits early in their careers.
Recognizing the administrative challenges that might arise from this change, the legislation also includes provisions designed to ease the burden on plan sponsors. Specifically, it offers a five-year delay on mandatory audit requirements for plans that add 18- to 20-year-old participants. This measure is intended to encourage employers to open their plans to younger workers without immediately incurring additional compliance costs. If enacted, this change could significantly enhance long-term retirement security for many young employees, particularly those working part-time or in industries where early career entry is common.
Protecting Americans’ Retirement Savings Act
Another bill gaining attention in 2025 is the Protecting Americans’ Retirement Savings Act (S.928), introduced on March 11, 2025, by Sen. Jim Banks (R-IN). This legislation reflects a growing intersection between national security policy and financial regulation. The bill proposes to amend ERISA by prohibiting retirement-plan investments in companies associated with foreign adversaries and sanctioned countries.
More specifically, if passed, this law would prevent ERISA-covered retirement plans from holding investments in entities based in nations designated as foreign adversaries or those subject to U.S. government sanctions. In addition to these investment restrictions, the bill would require plan fiduciaries to disclose any existing holdings in such entities. This transparency requirement is designed to give plan participants greater visibility into where their retirement savings are invested and to help ensure that retirement-plan funds do not inadvertently support companies aligned with U.S. adversaries.
Implications for Plan Sponsors
The implications of this legislation could be significant for plan sponsors, investment committees, and financial professionals managing retirement plan assets. Compliance would likely require a careful review of current plan holdings and may prompt adjustments to investment lineups and fund offerings to avoid exposure to prohibited securities. While the specifics of which entities and countries would be restricted remain subject to official designation, the proposal highlights an increasing expectation for retirement plan investments to align not only with financial objectives but also with broader national policy concerns.
The Bottom Line
Together, these two legislative initiatives reflect a broader federal effort to strengthen the retirement system by both expanding access to retirement plans and protecting plan assets. For plan sponsors, staying informed about these developments is crucial, as their potential passage could require updates to plan documents, administrative practices, participant communications, and investment policies. As Congress continues to deliberate these and other proposals, the retirement industry should prepare for the possibility of meaningful change in both plan eligibility rules and permissible investment options in the months ahead.
Patricia L. Hutchinson
Director of Retirement Plan Services
AIF®, MBA