Obama Administration Pushes to Expand Retirement Savings
Posted on Monday, February 8th, 2016 at 7:00 am
Saving up for retirement is incredibly difficult if you are living paycheck to paycheck. It can also be hard for families who have accrued a lot of debt. The Obama Administration is making a plan that will help more Americans save for retirement. The plan is to ensure near universal access to workplace retirement savings accounts and to put our country on the path to more portable retirement benefits.
The goal is to encourage more employers to offer retirement plans and to make it easier for workers to participate in them. One way to do that is to automatically enroll workers, who do not have access to a workplace retirement plan, in an IRA. Another is to allow long-term, part-time, workers to participate in their employer’s existing retirement plan.
At the same time, the plan involves enabling small businesses to come together and create a pooled 401(k) plan, at a lower cost than if they had to do it all by themselves. Tax credits may be provided for small businesses that begin offering retirement plans, or that choose to automatically enroll workers in existing plans.
Another goal is to build on existing efforts. For example, the Obama Administration has previously launched myRA. It was developed by the United States Department of Treasury in order to help more people save for retirement. People who don’t have access to an employer-sponsored retirement savings plan, or who lack other options to start saving for retirement, can use myRA.
The myRA offers things that current employer plans do not. A person who uses myRA can set up automatic contributions (of an amount they can afford). They can withdraw the money they put into their myRA at any time without paying tax or penalties. The person can change jobs and keep their myRA account. The investment is backed by the United States Treasury, and the account will earn interest. (The myRA follows Roth IRA rules, and has an annual contribution limit).
The President’s proposals would provide more than 30 million people with access to workplace retirement savings options. The plan recognizes that part-time workers are less likely to have access to a retirement plan than are full-time workers. The plan will require that employees who have worked for an employer for at least 500 hours per year, for at least three years, will be eligible to participate in their employer’s existing retirement plan.
In addition, there will be new rules put in place the ensures that retirement savers receive advice that is in their best interest, especially when they are changing jobs. The Department of Labor has proposed a conflict of interest rule – which is expected to be finalized in 2016 – that requires the adviser who manages an IRA plan to provide advice that truly is in their client’s best interest.