White House Unveils Sweeping Retirement Proposals
A year ago, President Obama touted the voluntary MyRA in his State of the Union Address — but the White House has a lot more to say about retirement this year — and it’s a lot less voluntary.
According to a White House fact sheet
, the administration is touting a series of retirement tax reform proposals that they claim would give 30 million additional workers access to a workplace savings opportunity.
They are proposing:
- Requiring employers with more than 10 employees that do not currently offer a workplace retirement plan to automatically enroll their workers in an IRA. These auto-IRAs would let workers opt out of saving if they choose but, according to the White House, would “…let them start saving without sorting through a host of complex options.”
- To provide tax cuts for auto-IRA adoption, as well as for businesses that choose to offer employer plans or switch to auto-enrollment. The president’s auto-IRA proposal would provide any employer with 100 or fewer employees who offers an auto-IRA a $3,000 tax credit, and the president also proposes to triple the existing “start up” credit, so small employers who newly offer a retirement plan would receive a $4,500 tax credit. Small employers who already offer a plan and add auto-enrollment would get an additional $1,500 tax credit.
- Requiring employers who offer plans to allow voluntary contributions from part-time workers. The proposal says that employers who offer plans must permit workers who have worked for the employer for at least 500 hours per year for 3 years or more to make voluntary contributions to the plan.
As for how they plan to pay for these new initiatives, the White House says it will do so by “closing retirement tax loopholes for the wealthy,” more specifically by bringing back an item from last year’s budget that would impose a retirement savings cap of $3.4 million.
In unveiling this year’s version of this idea, the White House highlighted findings from a recent report from the Government Accountability Office (GAO) that focused on the large IRA accumulations of a few individuals, though they did not reference the GAO’s caveat that “likely occurred by account holders investing in assets “unavailable to most investors” that were initially valued very low and “offering disproportionately high potential investment returns if successful."
They also failed to acknowledge an analysis by the nonpartisan Employee Benefit Research Institute that indicated that this type of savings cap could have a much broader impact over time.