Currently, there is a flurry of activity, both at a federal and state level, to address one of the largest economic conundrums facing the country. According to the report issued by the Government Accountability Office in 2013, 42 million, or roughly one-third, of all private-sector workers are employed by small businesses (defined as less than 100 employees). Yet, only 14% of these businesses maintain a retirement program.
The availability of a workplace program, however, is no guarantee of a secure future. In the most recent Retirement Confidence Survey issued by the Employee Benefit Research Institute, 47% of those surveyed have less than $25,000 in savings and investments. In short, not enough Americans are afforded the convenience of an employer-sponsored retirement plan and too few Americans have the resources necessary to ensure a comfortable retirement.
These daunting statistics have put in play a number of initiatives designed to help Americans get on track financially. Today, there are efforts underway in Congress in addition to numerous state legislatures. The highlights of each of these activities follows.
Congress. As recently as July 19, Sen. Jeff Merkley, D-Ore., reintroduced his American Savings Act. Under this plan, employers who do not maintain a retirement program would automatically enroll each employee into an American Savings Account beginning at 3% of salary.
Workers would be permitted to opt out or increase their deferral to a maximum contribution of $18,000 per year. Contributions would grow tax-deferred and investment options would mirror those currently offered by the Federal Thrift Savings Plan. Employers would not be required to contribute but will be responsible for facilitating employee contributions via their payroll systems.
At the same time, Congress is considering the Retirement Security for American Workers Act. This legislation would make multiple employer pension plans (MEPPs) more accessible to private businesses. A MEPP is a plan that covers two or more unrelated businesses for income tax purposes. By pooling investments, participating businesses are able to defray expenses and eliminate some administrative requirements.