The House Ways and Means Committee passed by a 22-20 vote
late Thursday Rep. Richard Neal’s auto-IRA bill.
The legislation, which is now headed to the House Budget
Committee, requires employers that have been in existence for at least two
years, do not sponsor a retirement plan, and employ five or more people to
automatically enroll those employees in IRAs or 401(k)-type plans. After
enrolled, workers could decline to participate or drop out at any time.
To offset administrative costs, employers would receive a
tax credit, Neal, the committee’s chairman, said.
Neal is marking up Thursday and Friday legislative proposals
under the budget reconciliation instructions.
Neal’s bill also makes the Saver’s Credit refundable.
“Current law includes a nonrefundable tax credit — called
the Saver’s Credit — for eligible taxpayers who make elective deferrals to
tax-favored retirement plans or contributions to IRAs,” the Massachusetts
“The investments we’re considering would make the Saver’s
Credit refundable, so that those without any income tax liability receive a
benefit,” Neal said. “The proposal also would require the credit amount to be
contributed directly to a tax-favored retirement account, in effect, acting as
a matching contribution for savers.”
Neal’s bill also requires “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,”
according to the Insured Retirement Institute. “This feature can provide a
sustainable protected income stream that cannot be outlived.”
Neal went on to explain that automatic IRAs and Saver’s
Credit enhancements “would dramatically expand retirement savings in the United
According to recent analysis commissioned by the American
Retirement Association, implementing these proposals could add up to $7.3
trillion in additional retirement savings over a 10-year period and create more
than 63 million new retirement savers, Neal said.
Estimates also state that the auto-IRA and Saver’s Credit
enhancements would result in 7 million new Black savers and 10.8 million new
Latino and Latina savers, Neal said. More than 98% of new savers make less than
$100,000 per year.
Click here for the