(Bloomberg) — President Barack Obama will propose in his budget to let small employers more easily pool their 401(k) plans, in an effort to encourage them to offer the retirement accounts as fewer U.S. workers enjoy pensions.
Obama also will propose in his 2017 spending plan next month making it easier for job-hopping workers to keep track of multiple retirement accounts and combine them. He wants Congress to provide $100 million to test new, more portable accounts.
“Workers without a retirement plan at work rarely save,” Jeff Zients, Obama’s National Economic Council director, told reporters on a conference call. “We know that economic security in retirement is a kitchen table issue.”
Stagnant wages have plagued Obama’s presidency, making saving for retirement more difficult for many workers even as unemployment has been cut in half since he took office. Improving the administration and adoption of retirement savings accounts is a policy goal Obama shares with some congressional Republicans, including Senator Orrin Hatch of Utah, who introduced legislation in 2013 that would have allowed small employers to more easily offer pooled 401(k) plans.
In his last year in office, Obama has said that he hopes to work with with Republicans on a few legislative priorities where they agree, including an overhaul of U.S. sentencing rules to reduce prison terms for nonviolent drug offenses. Zients said the White House hopes for bipartisan support for Obama’s retirement proposals.
Current law allows limited combinations of employers’ 401(k) plans. Companies that band together must have “commonality” — for example, a group of car dealerships, Labor Secretary Tom Perez said on the call.
“What we’re saying in this proposal is you shouldn’t have to be just auto dealers coming together to be able to benefit from this,” he said.
The administration says allowing businesses to join together will reduce administrative expenses and make it cheaper to provide the accounts to workers.
Many people even a decade away from retirement haven’t saved enough, presenting a looming crisis that Obama is right to address, said Jared Bernstein, a researcher at the nonprofit Center on Budget and Policy Priorities in Washington and a former member of Obama’s economics team.
“It’s important because an increasing number of people are ill-prepared for the economic challenges they’ll face in retirement,” Bernstein said in an interview. “The administration, I can tell you as someone who used to work there, has long been aware of the problem.”
Last year, Obama created a retirement account called a myRA for people without 401(k) plans. The program doesn’t offer matching contributions from employers and doesn’t allow for investing in the stock market, but it also guarantees that participants won’t lose their savings.
His administration is expected to finish a regulation in the first quarter of the year that would require investment advisers to put their clients’ best interests first, called a “fiduciary” rule. It’s opposed by banks such as Morgan Stanley, Citigroup Inc. and Wells Fargo & Co., as well as mutual fund companies, independent brokers and insurers.