As expected, President Obama’s fiscal year 2016 federal budget proposal, released on Feb. 2, includes many retirement-related items. Here’s a brief recap of key retirement provisions.
- Automatic IRAs. Any employer that has been in business for at least two years, employs more than 10 workers and doesn’t sponsor a retirement plan would be required to automatically enroll its employees in a payroll-deduction IRA — but workers could opt out. Employers would receive up to a $3,000 as a tax credit.
- Tax credits. The “start-up” credit would triple to provide a tax credit of up to $4,500 to small businesses that begin offering a retirement plan. Small businesses with a plan in place would receive an additional tax credit of up to $1,500 for adding an auto-enrollment feature.
- Retirement savings cap. This controversial provision would cap tax-deferred savings in IRAs and employer-sponsored DC plans at about $3.4 million per individual. The exact figure would be tied to the amount necessary to provide the maximum annuity permitted for tax-qualified DB plans at age 62 under current law. Under the proposal, retirement savings would no longer be tax-deferred once the individual’s annual retirement income reaches $210,000.
For recaps on all the key retirement provisions, read the rest of my recent blog post, “Give and Take.”
Jon Vogler is a Senior Analyst, Retirement Research, at Invesco Consulting.
Invesco Distributors, Inc. 02/15
