House Aims to Push Business into Auto-Sign-Up Retirement Plans
House Democrats proposed requiring companies to automatically enroll workers for IRA or 401(k)-type retirement plans under a provision tucked into draft legislation enacting the bulk of President Joe Biden’s economic plan.
The proposal addresses a problem that has been exacerbated by the coronavirus pandemic, which is Americans have not saved enough for retirement. Nearly half of people aged 55 or older have nothing saved for after they stop working, according to a 2019 U.S. Government Accountability Office report.
The draft legislation, unveiled by the House Ways and Means Committee on September 7, 2021, would direct 6% of each employee’s pay into a retirement savings plan, gradually escalating to 10%, unless the employee took action to opt out or change their contribution rate.
The idea comes from House Ways and Means Chairman Richard Neal and his Republican counterpart Kevin Brady, who jointly introduced legislation last year to bolster retirement savings through automatic contributions.
Also, the legislation would allow low-income Americans who do not make enough to pay taxes to take advantage of the “savers credit,” a tax credit available to low- and middle-income Americans to partially offset retirement contributions. The credit would become refundable under tax law.
Companies that fail to comply with the new rules would face an excise tax of $10 per employee per day.
The retirement proposal was one of several draft measures released by the House Ways and Means Committee as part of work under way by panels in both chambers of Congress to assemble legislative text for what’s currently planned as a $3.5 trillion tax-and-spending package.
We will continue to update you as these measures are considered by Congress under proposed tax law changes. In the meantime, if you have questions, please contact us.