Employees wouldn’t receive a match, though the contributions would qualify them for the saver’s credit under existing tax law. That credit is paid through tax refunds, not as a contribution into the account.
Payroll Deductions
Also, employers would have to agree to allow payroll deductions. Unlike with 401(k) plans, they wouldn’t have to contract with a financial services company, follow nondiscrimination rules or have a fiduciary responsibility.
Treasury Secretary Jacob J. Lew said the program would begin operating by the end of the year. The government will begin looking for a financial agent with experience in administering IRAs.
‘Retirement Twist’
“This isn’t earth-shattering stuff,” said Brian Graff, the chief executive officer of the American Society of Pension Professionals & Actuaries. “But it is a step in the right direction to get more people saving for retirement, which I would think is a bipartisan issue.”
“I don’t expect this to get a lot of pushback,” said Graff, who discussed the proposal in advance with Treasury officials. He said it draws on an existing program that permits workers to purchase U.S. savings bonds through payroll deductions and adds “a retirement twist.”
The proposal resembles an earlier Obama administration plan that would have required employers to offer an automatic IRA option to employees. That plan, which was included in Obama’s 2014 budget, would have cost the government an estimated $17.6 billion in foregone revenue over 10 years.
About 68 percent of U.S. workers had access to retirement benefits as of March 2013, with 54 percent participating, according to the Bureau of Labor Statistics.
Vanguard, Fidelity