The Department of Labor will issue guidance on state
mandates that require small businesses to automatically enroll employees in
IRAs by the end of the year. That announcement was made at Monday's Conference
on Aging, hosted at the White House.
At least 20 states have proposals in the pipeline that would
require businesses with, in some cases, as few as five employees to enroll
employees in savings plans. Initiatives in Oregon, Washington and Illinois have
already passed. But confusion as to whether or not employers that are required
to enroll workers will be subject to the Employee Retirement Income Security
Act has stalled some efforts at the state level.
The DOL’s guidance will address those questions and pave the
way for wider adoption of enrollment mandates at the state level, according to
President Obama, who said he has instructed to DOL to post guidance by the end
of the year during his opening remarks at the Conference on Aging. Obama said
every budget proposal he has advanced included a federal mandate for
comprehensive IRA enrollment, but Congressional inaction has slowed the effort.
The White House also announced a new initiative with
private-sector software developers to enhance Social Security benefit estimate
tools. Betterment, Financial Engines and Hello Wallet were three fintech
companies named as working with new data from the Social Security
Administration to develop enhanced benefit projection software. And new
guidance issued by the DOL will facilitate greater adoption of longevity
annuities in 401(k) savings plans, by addressing sponsors’ fiduciary
obligations to monitor insurance company’s ability to meet future obligations.
In a press release, the White House named several
private-sector sponsors of 401(k) plans as leading the way in plan design. Alaska
Airlines, The Clorox Company, Vermeer and United Technologies Corporation all
automatically enroll employees at 6 percent of salary, and automatically
escalate deferral rates annually.
UTC is also launching and education program to encourage
workers to keep assets in plan after they retire, as opposed to rolling assets
over into “often higher-fee IRAs,” according to the White House press release.
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