New Auto-IRA Bill Introduced in House

“Importantly, it achieves this by leveraging the existing public-private partnership that drives the successful 401(k) system providing benefits to over 100 million Americans.”

Neal’s “transformative legislation would automatically create federal IRAs for workers without other access to retirement plans — the first, essential step to securing every worker’s right to a secure, dignified retirement,” Thasunda Brown Duckett, president and CEO of TIAA, relayed Wednesday in another statement.

The legislation “builds on proven policy solutions: 19 states have implemented state-based automatic IRA-for-all programs for private-sector employees,” Duckett added. “A federal program would help ensure workers’ pathway to retirement security no longer depends on their employer or state.”

As to the amount of salary or wages automatically enrolled, the legislation requires all automatic contribution plans or arrangements (except for automatic IRAs) to:

• Default at a minimum of 6% (can be higher, but only up to10% the first year and 15% thereafter).
• Automatically escalate at 1% per year up to 10%, i.e., 6% to 7% to 8% to 9% to 10%.

Treasury will prescribe rules for implementation of automatic escalation.

For automatic IRAs, the exact level of default contributions is not left to the employer’s discretion, the bill summary explains.

The set level for default contributions is as follows:

• Year 1, 6%
• Year 2, 7%
• Year 3, 8
• Year 4, 9%
• All subsequent years, 10%

The bill also would require employers to offer employees with at least a $200,000 vested retirement account balance the option to take a distribution of up to 50% of savings to purchase a lifetime income solution, such as an annuity, according to the Insured Retirement Institute.