What You Need to Know
- Current securities laws prevent an employer from establishing an IRA on behalf of an individual, ASA said.
- Without changes, the legislation would require small businesses to use only 401(k) plans.
- The bill mandates that any business with 5 or more eligible employees must offer an automatic retirement plan.
The automatic IRA provision in the House Ways and Means Committee’s tax package “directly conflicts with existing securities laws,” the American Securities Association told House Ways and Means Committee Chairman Richard Neal, D-Mass., Wednesday.
“Subtitle B’s requirement that qualifying SIMPLE plans and Automatic IRA Arrangements be established by employers without participation by the employee directly conflicts with existing securities laws,” Chris Iacovella, ASA’s CEO, told Neal in a letter.
“Current securities laws prevent an employer from establishing an IRA on behalf of an individual.”
Securities rules also impose know-your-customer, investment authorization, dispute resolution, and Regulation Best Interest requirements for IRAs, Iacovella continued, “that cannot be satisfied without action by the account holder (in this case, the employee of a small business). This means SIMPLE and automatic IRA plans cannot be opened automatically on behalf of an employee by an employer.”
Subtitle B of the House Ways and Means Committee’s Build Back Better legislation, H.R. 5376, Iacovella told Neal, mandates that any business with five or more eligible employees must offer an automatic retirement plan.