Washington, D.C. – U.S. Senator Sheldon Whitehouse (D-RI) today introduced legislation to help millions of Americans save for a financially secure retirement through an automatic payroll deduction Individual Retirement Account, or Auto-IRA.
“We know that automatic savings programs are an effective strategy for building a nest egg, yet tens of millions of Americans don’t have that option through their job,” said Whitehouse. “This bill would make it easier for employees to save for retirement in a simple fashion without overburdening employers.”
The United States faces an impending crisis, as many Americans are simply not saving enough for retirement, according to financial planners. An estimated 30 million full-time, year-round workers have no employer-provided retirement plan or other opportunity to save through workplace contributions. An alarming 25 percent of adults have no retirement savings or pension at all.
The Automatic IRA Act offers a common-sense solution to expand Americans’ retirement savings. The legislation would require employers who do not provide another qualified retirement plan and who have more than 10 employees to enroll workers automatically in an Auto-IRA unless the employee opts out. Employers would receive tax credits to defray the costs of setting up the accounts. According to a Brookings report, automatic enrollment for 401(k) plans can cut nonparticipation rates from roughly 25 percent to as little as 5 or 10 percent.
According to surveys by the Pew Charitable Trusts, almost 90 percent of small- to mid-size employers that are not currently offering retirement savings plans support the idea of Auto-IRA programs.
The idea for an Auto-IRA was first developed by Brookings Institution and Heritage Foundation scholars.
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