President Obama Pushes to Expand Retirement Plansby
The Obama administration has been serving up some of the president's budget proposals for 2017 in bits and pieces. The latest morsels that have been released are designed to help Americans, especially lower-paid workers, save more for retirement.
Obama is scheduled to present his spending plan to Congress on Feb. 9. The ideas presented in these budgetary guidelines seldom gain much traction among lawmakers, especially during these divisive times. But there's more optimism this year that both parties will be able to rally around such a critical issue.
âWe need to find new ways to help working families build up a nest egg,â Jeffrey Zients, director of the National Economic Council, an advisory board to the president, told the New York Times. Zients noted that more than half of all workers at businesses employing fewer than 50 people don't have access to employer-based retirement plans.
All the details haven't been fleshed out yet, but Obama's proposals will focus on easing employer responsibilities for retirement plans and opening up more avenues to workers who currently don't participate in a plan or need more incentive to supplement retirement savings. At the core, there are two main proposals:
1. Multiemployer 401(k) plans. The 401(k) plan is popular among large-to-midsized companies, but smaller companies have often shied away, mostly due to administrative costs and burdensome compliance. Currently, related businesses can band together in a plan, but not those that are in different industries. Obama's proposal would facilitate greater use of âpooledâ plans for employers that would cut down costs and also provide portability to workers.
2. Automatic IRAs. Employers aren't mandated to provide a retirement plan to employees. But under Obama's proposals, an employer with more than 10 employees that doesn't offer a retirement plan would be required to provide IRAs to all of its workers. These automatic IRAs, which would be funded through payroll deductions, would generally be governed by traditional and Roth IRA rules. Employers with 100 or fewer employees that already do this would receive a tax credit of up to $3,000 to help offset the administrative expense.
Note that the new proposals are similar to ones that have appeared on the president's âwish listâ in the past. It will require an act of Congress to amend all the existing legal requirements, so their authorization is far from certain. But the tea-leaf readers on Obama's staff are sensing that the time could be ripe for significant changes in this area.
The administration may also be encouraged by another retirement-savings device that recently came to fruition. The MyRA, a type of retirement account comparable to a traditional IRA, was initially proposed by Obama in a previous budget. After a pilot program was launched in 2015, the MyRA made its official debut in January, albeit to a tepid response.
We will keep a close watch to see how the latest proposals progress in this presidential election year.
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...