In the proposed $3.5 trillion bill Democrats want to pass is a provision to force companies to automatically enroll workers into IRAs. The Wall Street Journal reports:
Democrats have included a provision in their $3.5 trillion healthcare, education and climate bill that would require companies without retirement plans to automatically enroll workers in individual retirement accounts.
The House Ways and Means Committee on Thursday voted 22-20 to approve the measure, which committee chairman Richard Neal, (D., Mass.) has supported for years.
Should the package pass, the move could significantly broaden access to workplace retirement savings accounts, especially for employees of small businesses, many of which offer no plan at all. Some small business groups say the requirement would be too onerous for small employers.
Democratic leaders have said they would like to pass the $3.5 trillion package later this month in the House, where the party holds a slim majority. There are still significant divisions among Democrats about the scale of the spending and which health, tax and climate provisions should be included. The draft legislation currently includes paid family leave and an expansion of Medicare, among other items.
“This is a big deal,” Michael Kreps, a principal at Groom Law Group, who specializes in retirement plans and policy, said of the IRA provision. If it passes, he said, “It’s going to move us farther towards universal coverage than a bill ever has.”
Starting on Jan. 1, 2023, the provision would require employers to deduct at least 6% from workers’ paychecks and automatically increase that savings rate by 1 percentage point a year until reaching 10% of pay.
Companies exempt from the requirement, aside from those that already offer retirement plans, would include those with five or fewer employees and those which have been in business for less than two years. The measure wouldn’t cover employees under 21 and would require employers to automatically enroll part-time employees working more than 500 hours a year for at least two consecutive years.
Employees would be free to opt out or change their savings rate.
Companies that fail to comply would be fined $10 per employee per day for up to three months.
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