Prior to their latest recess, Congress revisited the automatic enrollment debate. U.S. Senators Jeff Bingaman and John Kerry introduced the Automatic IRA Act of 2010, which they say takes a common-sense approach to addressing the nation’s retirement savings crisis. When fully phased in, the bill plans to give nearly 42 million Americans an easy, effective way to invest for retirement.
According to the bill, the Act (S. 3760) enables employees who work for a private business with more than 10 workers and whose employer does not already offer a retirement plan to contribute to retirement savings through payroll deductions. Worker contributions would be deposited into their own Individual Retirement Account, ultimately managed by the same banks, mutual funds, insurance carriers and other institutions that currently provide IRAs. The approach builds on the use of automatic features in 401(k) plans that encourage employees toward sensible decisions (while allowing them to make alternative choices), which has proven highly successful in raising 401(k) contribution rates.
Employers will receive a tax credit to cover the administrative costs of setting up the IRA account, but they will not be allowed to make a contribution to it.
“Last year, only half of all American workers had access to any type of retirement plan or account at work. As a result, millions of Americans enter their retirement years with inadequate savings,” Bingaman (D-New Mexico) said in a statement. “Our bill will open the door to a secure retirement for nearly 42 million workers, including 250,000 New Mexicans. Giving workers a way to directly deposit some of their paycheck into a retirement account will help millions of Americans better prepare for their golden years.”
“This legislation simply makes it easier for Americans to save for retirement without making businesses shoulder new burdens. More than 800,000 workers in