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Bill would automatically enroll employees in workplace IRAs

On August 5, 2010 Senator Jeff Bingaman (D-NM) introduced the Automatic IRA Act of 2010 (S. 3760).  This bill would require most employers that do not sponsor a retirement plan to automatically enroll their employees in an IRA.

Employees would be given choices about whether to participate in the IRA, what type of IRA (Roth or Traditional), how much to contribute, and investment options. However, if the employees do not make these choices, the bill would require employers to automatically enroll employees into Roth IRAs at a contribution rate of three percent of the employees’ pay, and place them in a “principal preservation” investment fund. Once the accounts attain balances over $5,000 they would be transferred into life-cycle or balanced funds unless the employees choose different investment options.

The auto IRA requirements would apply to private employers that do not sponsor qualified retirement plans including employers who sponsor retirement plans that are not offered to a subsidiary, division or other unit of the employer. The bill would initially apply to larger employers with 100 or more employees and phase in employers with fewer employees so that by 2015 all employers with 10 or more employees would be subject to providing an automatic IRA to their workers.

The bill also includes two types of tax credits for small businesses. One type of tax credit is for small businesses that sponsor traditional pension plans or 401(k)-type plans.  A second, smaller tax credit, is for employers subject to the auto IRA requirements

Read a detailed summary of the bill posted on Senator Bingaman’s website.

Read the Automatic IRA Act of 2010 (S. 3760).

Congressman Richard Neal (D-MA) along with Allyson Schwartz (D-PA), Earl Blumenauer (D-OR) and Pete Stark (D-CA) introduced the Automatic IRA Act of 2010 (H.R. 6099) in the House on August 10, 2010.

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