Washington, DC – Senator Sheldon Whitehouse (D-RI) and Congressman Richard E. Neal (D-MA) introduced legislation today that would dramatically enhance the retirement security of millions of Americans. According to most financial planners, the United States is at the precipice of an impending retirement crisis. Many Americans are simply not saving enough to be financially secure in retirement. It is estimated that 75 million workers have no employer-provided retirement plan or other opportunity to save through workplace contributions.
The Automatic IRA Act offers a common-sense solution to dramatically expand retirement savings in the U.S. Under the bill, tens of millions of workers would be eligible to save for retirement through a simple payroll deduction. The non-partisan Retirement Security Project has estimated the Whitehouse-Neal Auto IRA proposal could raise net national savings by nearly $8 billion annually.
“Each month, tens of millions of Americans build toward a comfortable and dignified retirement by contributing to employer-based savings plan. Unfortunately, half of American workers don’t have access to employment-based accounts and may find it much more difficult to save,” said Senator Whitehouse, a member of the Senate Budget Committee. “This bill would give those without access to a 401 (k) plan the opportunity to benefit from automatic monthly savings. Coupled with Social Security, such tax-preferred savings can help people in Rhode Island and across the country enjoy financial freedom in their golden years.”
“Getting more low and middle-income workers into the retirement savings system remains one of my top priorities. Far too many Americans are putting their retirement at risk because they do not have access to a workplace savings plan. I believe this auto-IRA bill can dramatically improve their post-employment years. By making it easier for workers to save, millions of Americans will enjoy their retirement more secure and content,” said Congressman Neal, a senior member of the House Ways and Means Committee.
The Whitehouse-Neal legislation creates automatic payroll deposit Individual Retirement Accounts, or Auto IRAs, for workers who do not have access to employer-provided qualified retirement plans. The bill would also require employers with 10 or more employees to automatically enroll workers in an Auto IRA unless the employee opts out. The employers could receive tax credits to defray the costs of setting up the accounts. We know that automatic enrollment has been extremely successful in getting more people to save for retirement. Studies have shown that participation rates are at least 10 percentage points higher in plans with automatic enrollment (77 percent) than those without it (67 percent). The GAO also found that automatic IRA enrollment could increase the number of lower-earning households with retirement savings and increase retirement income as well.
The Auto IRA proposal, which was jointly developed by Brookings Institution and Heritage Foundation scholars, has garnered widespread support, including the AARP, the U.S. Black Chamber, the Women’s Institute for a Secure Retirement, and the Aspen Institute Initiative on Financial Security.
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