The House Ways and Means Select Revenue Measures Subcommittee held hearings on bills that would encourage employers to automatically enroll their employees in individual retirement account plans.
One bill is aimed at creating automatic payroll deposit IRAs for workers who do not have access to employer-sponsored pension plans. "The bill would require employers to automatically enroll employees in a payroll deduction IRA unless the employee opts out," said subcommittee chairman Richard Neal (pictured), D-Mass., in a statement. "Our proposal could raise the national savings rate by nearly $8 billion annually."
The subcommittee also considered a recent report from the Government Accountability Office on how government actions could encourage more employers to provide IRAs.
"Experts GAO interviewed said that several factors may discourage employers from offering these IRAs to employees, including administrative costs and concerns about employer fiduciary responsibilities," said the report. However, the GAO found some objections to mandating the automatic enrollments. "Other experts told us that automatically enrolling workers into payroll-deduction and SIMPLE IRAs could increase employee participation; however, small business groups and IRA providers said that mandatory automatic enrollment could be burdensome to small employers."
Rep. Ron Kind, D-Wis., discussed a bill he has proposed to help more small businesses offer both IRAs and 401(k) plans to employees. "As I dug into the issue I discovered that the majority of small businesses don't offer any retirement savings plans to employees because it is often a complicated, costly and a somewhat risky endeavor," he said.
H.R. 5160, the Small Businesses Add Value for Employees Act, would remove the requirement that SIMPLE IRA plans operate only on a calendar-year basis and create a new automatic IRA option in the Tax Code. The SAVE Act would increase the Small Employer Pension Plan Start-up Cost Credit for small business owners to 50 percent of the start-up costs for new SIMPLE IRA plans and would allow for a one-time $25 tax credit for every new employee enrolled in the savings program. The bill would also increase the maximum annual contribution limit that an employee could put into a SIMPLE IRA from $10,500 to $15,500, putting it on par with the limits for 401(k) plans.
Rep. Kenny Hulshof, R-Mo., a co-sponsor of the SAVE Act, noted that nearly 2 million employees now participate in either a SIMPLE IRA or 401(k) plan. "It is quite clear that SIMPLEs have proven to be a valuable retirement tool, but obstacles remain and we can clearly do more to make these plans more appealing to small businesses," he said.
The Treasury Department sees advantages in offering the plans but is concerned about adding to the burden on small businesses. "One of the key features that makes employer-sponsored IRAs attractive to small employers with limited resources is the fact that the employer is not required to file annual reports with the Department of Labor or the IRS," said Treasury benefits tax counsel Thomas Reeder. "This feature, however, makes it more difficult to determine precisely how many employers are adopting them and how many employees participate. Requiring more reporting would make it harder for employers with limited administrative resources to adopt employment-based IRA programs."
