The bill requires employers with at least 10 employees that do not already offer a retirement benefit plan to set up an automatic IRA program for their employees.
In his statement made on the House floor, Neal said the bill is sensitive to any increased burden on small businesses, so it provides for a temporary tax credit for employers with less than 100 employees to offset the upfront administrative cost of establishing the program. Only employers with at least 10 employees, which have been in business for at least two years, would be covered by the bill. Neal is chairman of the Subcommittee on Select Revenue Measures of the Ways and Means Committee.
Further, the bill does not mandate any matching contributions by employers or any fiduciary responsibility for the management of the accounts.
However, Neal said he hopes that once employers start participating, they will decide to convert these arrangements to 401(k) plans. The IRA contribution limits are much lower than the 401(k) limits, so business owners may see incentives to switch to the bigger plans, he noted.
Employers have the option of choosing a private sector manager for the Auto IRAs, while allowing each employee the right to transfer, or simply allowing the employee to designate the provider at the outset. As a default, employers may also send these contributions to the Treasury Department for the purchase of newly created Retirement Bonds, or R-bonds.
The Auto IRA proposal was jointly developed by Brookings Institution and Heritage Foundation scholars. The bill was introduced in the U.S. Senate last week (see Auto-IRA Bill Introduced With Employer Mandates).A summary of the bill is here.