Strengthening Financial Security Through Short-Term Savings Accounts Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1019 To allow employers to offer short-term savings accounts with automatic contribution arrangements for financial emergencies. IN THE SENATE OF THE UNITED STATES APRIL 3, 2019 Mr. JONES (for himself, Mr. COTTON, Mr. BOOKER, and Mr. YOUNG) intro- duced the following bill; which was read twice and referred to the Com- mittee on Health, Education, Labor, and Pensions A BILL To allow employers to offer short-term savings accounts with automatic contribution arrangements for financial emer- gencies. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Strengthening Finan- 4 cial Security Through Short-Term Savings Accounts Act 5 of 2019’’. 6 SEC. 2. PURPOSE. 7 The purpose of this Act is to improve financial secu- 8 rity, facilitate convenient and affordable access to all types 9 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 2 •S 1019 IS of employer sponsored short-term savings accounts, reduce 1 leakage, and complement overall retirement savings. 2 SEC. 3. STAND-ALONE SHORT-TERM SAVINGS ACCOUNTS. 3 (a) IN GENERAL.—An employer may make available 4 to employees a stand-alone, short-term savings account, 5 using an automatic contribution arrangement (as defined 6 in section 514(e)(2) of the Employee Retirement Income 7 Security Act of 1974 (29 U.S.C. 1144(e)(2))) in accord- 8 ance with this Act. An employer that offers employees a 9 short-term savings account shall deduct amounts from 10 each participating employee’s wages in accordance with 11 subsection (e) and transfer such amounts to a savings ac- 12 count that meets the requirements of subsection (b). 13 (b) ACCOUNT REQUIREMENTS.— 14 (1) IN GENERAL.—A short-term savings ac- 15 count offered in accordance with subsection (a) 16 shall— 17 (A) have no minimum balance require- 18 ments, reasonable fees as determined by a joint 19 rulemaking by the Secretary of Labor and the 20 Secretary of the Treasury, in consultation with 21 other financial regulators, and a maximum ac- 22 count balance of not to exceed $10,000, ad- 23 justed annually for inflation and by the Sec- 24 retary of the Treasury; 25 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 3 •S 1019 IS (B) have a balance that is made readily 1 available, in whole or in part, at any time to an 2 individual who owns the account, subject to any 3 reasonable, limited restrictions imposed on 4 withdrawals pursuant to the terms of the ar- 5 rangement; and 6 (C) make available to the individual who 7 owns the account, not later than 5 business 8 days after the individual terminates employ- 9 ment, the entire account balance. 10 An employer may structure and adapt such short- 11 term savings account to assist employees with short- 12 term financial emergencies, so long as such savings 13 accounts meet the minimum standards set forth in 14 this Act. 15 (2) COORDINATION.—An employer may coordi- 16 nate with a bank, credit union, or payroll card pro- 17 vider that is licensed by the Federal Government or 18 a State government offering a short-term savings ac- 19 count under subsection (a), including— 20 (A) an FDIC insured pooled account that 21 the employer opens in the name of the employer 22 for which the employer maintains responsibility, 23 subject to reasonable fees as defined in section 24 1022.380 of title 31, Code of Federal Regula- 25 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 4 •S 1019 IS tions, and New Opinion No. 8 of the General 1 Counsel of the Federal Deposit Insurance Cor- 2 poration (73 Fed. Reg. 67155 (November 13, 3 2008)), a variation of a savings account for a 4 short-term savings account offered under sub- 5 section (a); and 6 (B) an individual account opened in the 7 name of the employee for which the employee 8 maintains responsibility. 9 (3) REGULATIONS.—The Secretary of the 10 Treasury, in consultation with the Secretary of 11 Labor, shall promulgate regulations carrying out 12 this subsection. Such regulations shall address the 13 responsibility of employers to establish and maintain 14 reasonable claims procedures, any associated pen- 15 alties for failure to comply with this Act, the timing 16 and notice of benefit determination, how the funds 17 must be invested and minimum interest require- 18 ments, and the manner and content of benefit deter- 19 mination, rights of participants in these accounts, 20 among other things as they determine are necessary. 21 (4) APPLICABILITY.—Notwithstanding any 22 other provision of law, an employer may designate 23 an account for direct deposit for a short-term sav- 24 ings account offered under subsection (a). 25 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 5 •S 1019 IS (c) ACCOUNT SPONSOR REQUIREMENTS.—Employ- 1 ers— 2 (1) shall have a fiduciary responsibility to en- 3 sure that— 4 (A) any account offered in accordance with 5 subsection (a) meets the requirements of sub- 6 section (b); 7 (B) relevant information about partici- 8 pating employees is submitted safely and se- 9 curely to the insured depository institution or 10 insured credit union; 11 (C) amounts are properly deducted from 12 employees’ wages and transferred to the finan- 13 cial institution on behalf of the employees in ac- 14 cordance with subsection (f); 15 (D) employees have clear instructions and 16 an easy means to make changes to contribu- 17 tions or stop them entirely at any time; and 18 (E) employees have clear guidance on how 19 they may access their money and how quickly 20 they will receive their money upon request; and 21 (2) have no other fiduciary responsibility be- 22 yond the responsibilities described in paragraph (1). 23 (d) APPLICABILITY OF BANKING LAWS.— 24 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 6 •S 1019 IS (1) IN GENERAL.—Except as provided in para- 1 graph (2), Federal banking laws (including regula- 2 tions) shall apply to short-term savings accounts as 3 if the short-term savings accounts were savings ac- 4 counts. 5 (2) KNOW YOUR CUSTOMER LAWS.—Notwith- 6 standing any other provision of law, a bank, credit 7 union, or payroll card provider offering a short-term 8 savings account under subsection (a) shall be treated 9 as if it were an ERISA plan, for purposes of rules 10 relating to Anti-Money Laundering, Customer Iden- 11 tification Program (CIP), Suspicious Activity Report 12 (SAR) requirements, or any other rules required to 13 establish the identity of the account holder before an 14 account for a short-term savings account is opened 15 in accordance with this Act. The Secretary may pre- 16 scribe regulations which would establish minimum 17 standards that such an arrangement would be re- 18 quired to satisfy in order for this subsection to apply 19 with respect to such an account. 20 (e) PREEMPTION OF STATE ANTI-GARNISHMENT 21 LAWS.—Notwithstanding any other provision of law, this 22 section shall supersede any law of a State which would 23 directly or indirectly prohibit or restrict the use an auto- 24 matic contribution arrangement for a short-term savings 25 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 7 •S 1019 IS account, as if it were an ERISA plan. The Secretary may 1 prescribe regulations which would establish minimum 2 standards that such an arrangement would be required to 3 satisfy in order for this subsection to apply with respect 4 to such an account. 5 (f) TRANSFERS TO ACCOUNTS.—The account sponsor 6 shall transfer each pay period— 7 (1) to the short-term savings account an 8 amount equal to the percentage of the employee’s 9 compensation, or a fixed amount, as the account 10 sponsor determines; and 11 (2) employees shall have the ability to adjust, 12 stop, or pause, their contributions as they see fit. 13 (g) DISCLOSURE REQUIREMENTS.—An account spon- 14 sor shall disclose in writing, or electronically if the em- 15 ployee so elects, to the participating employee within 5 16 business days before the commencement of the contribu- 17 tions to the account— 18 (1) a short-term savings account description, 19 including the contours, all terms and conditions, and 20 fees associated with the short-term savings account; 21 (2) describe the tax treatment of the short-term 22 savings account and the tax treatment of any tax fa- 23 vored account that is offered; 24 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 8 •S 1019 IS (3) any rules with respect to deposits or con- 1 tributions into the account, maintenance of the ac- 2 count, investments, balances, escalations not to ex- 3 ceed 4 percent and withdrawals, replenishment of 4 the accounts, balance caps, and other features of the 5 account; and 6 (4) the access and availability to account infor- 7 mation and related account information to partici- 8 pating employees. 9 (h) EFFECTIVE DATE.—The provisions of this Act 10 shall be effective upon the date of enactment of this Act. 11 SEC. 4. SHORT-TERM SAVINGS ACCOUNT WITHIN A RETIRE- 12 MENT PLAN. 13 (a) IN GENERAL.—Not later than one year after the 14 date of enactment of this Act, the Secretary of the Treas- 15 ury or the Secretary’s delegate shall issue regulations or 16 other guidance that interprets and applies the rules of the 17 Internal Revenue Code of 1986 applicable to tax-qualified 18 plans and arrangements described in sections 219(g)(5), 19 408 (including 408(q) and 408A), and 457(b) of such 20 Code in a manner that facilitates the offering and oper- 21 ation, including automatic enrollment and automatic esca- 22 lation, of short-term savings arrangements as part of or 23 in conjunction or coordination with, any such tax-qualified 24 plan or arrangement. 25 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 9 •S 1019 IS (b) REQUIREMENTS.—Any short-term savings ac- 1 count that is part of a tax-qualified plans and arrange- 2 ments described in sections 219(g)(5), 408 (including 3 408(q) and 408A), and 457(b) of the Internal Revenue 4 Code of 1986 shall comply with applicable plan require- 5 ments, including provisions for the retention of assets in 6 a qualified trust, timely payment of assets, and distribu- 7 tion of assets upon plan or participant termination. Any 8 savings account that is not part of a tax-qualified plan, 9 bank or credit union, shall be subject to appropriate regu- 10 lations by the Department of Treasury. 11 SEC. 5. PILOT PROGRAM. 12 The Secretary of the Treasury may establish a pilot 13 program that incentivizes employers to set up short-term 14 savings accounts under this Act. Any employer that par- 15 ticipates in the pilot program shall be eligible to receive 16 not more than $400 per employee account. 17 SEC. 6. STUDY OF EFFECTIVENESS OF SHORT-TERM SAV- 18 INGS ACCOUNT OPTIONS. 19 Not later than 1 year after the date of enactment 20 of this Act, the Comptroller General shall study, and re- 21 port to the Committee on Finance, the Committee on 22 Banking, Housing, and Urban Affairs, and the Committee 23 on Health, Education, Labor, and Pensions of the Senate 24 and the Committee on Ways and Means of the House of 25 VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS 10 •S 1019 IS Representatives, the effectiveness of various methods for 1 developing the savings accounts described in this Act, in- 2 cluding after-tax employee contributions to a plan de- 3 scribed in section 401(k) of the Internal Revenue Code 4 of 1986, deemed treatment of such plans as a Roth plan 5 for purposes of such Code, and the use of depository ac- 6 counts, including payroll cards. 7 Æ VerDate Sep 11 2014 18:59 Apr 10, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\S1019.IS S1019 pbinns on DSK79D2C42PROD with BILLS