The American Council of Life Insurers (ACLI) announced today that for the first time ever it will throw its considerable weight behind expected federal legislation that will require employers without retirement plans to provide workers with access to a payroll deduction saving plan that invests their contributions in an IRA, 401(k) or other qualified retirement savings plan the employer must set up.
The legislation is being championed by House Ways and Means Committee Chairman Richard Neal (D-Mass.), who is expected to introduce his bill later this year.
“Endorsing an employer requirement is not a policy shift that ACLI makes lightly,” said ACLI President and CEO Susan Neely.
“This bold approach is clearly needed to close the retirement savings gap and prevent a retirement crisis,” said Susan Neely, President & CEO of the ACLI, which has historically rejected employer mandates when it comes to retirement plan legislation.
The legislation is expected to closely tracks Neal’s Automatic Retirement Plan Act of 2017 which would require all employers with 10 or more employees to create payroll deductions that invest workers’ contributions in an IRA or other qualified retirement plan.
The bill does not require employers to make matching contributions, simply to set up a plan and payroll deduction.
While employees could opt out, they would be automatically enrolled in their company’s plan—a technique that has been shown to help Americans drastically increase their savings. In the 2017 version of the bill, employees would have had 6% of their income contributed to a workplace retirement plan and have these contributions automatically escalated each year.
The bill’s relatively straightforward requirements would lead to at least 22 million more Americans saving for retirement, according to ACLI estimates based on data from the Bureau of Labor Statistics.
“We believe the scope of the looming crisis demands fresh thinking,” Neely said. “Automatically enrolling workers into a retirement savings plan is not a big new government program. It is a market-based solution that can help more people save more of their own money for the good of their families’ futures. Family financial security is the ultimate peace of mind.”
It is unclear whether the Financial Services Institute and US Chamber of Commerce, which have traditionally opposed retirement plan mandates on employers, will have the same change of heart the ACLI did. Both groups want to see Neal’s bill before commenting.
What is certain is that people are living longer without adequate retirement savings and increasing access to workplace plans can be a powerful solution, Neely added.
“This proposal is designed to make it easier for employers to offer retirement plans. Workers would have the right to opt-out of participation but based on experience the majority will take advantage of the savings opportunity. When offered a retirement plan by their employer, four out of five full-time private-sector workers participate.”