Addressing the first annual NAPA DC Fly-in Forum on Sept. 17, Mark Iwry, the Department of Treasury’s Senior Advisor on Health Care and Retirement Policy, spoke about his auto-IRA proposal. The proposal is intended to address the coverage issue, as tens of millions of American workers still do not have access to an employer sponsored retirement plan. Research shows that, left on their own, fewer than 5% of workers save for retirement, but more than 70% participate in employer sponsored retirement plans.
Essentially, Iwry is trying to emulate the best features of corporate plans -- workplace savings, ownership of accounts and auto-plan features -- in his auto-IRA proposal.
Explaining why IRAs are being proposed rather than creating a new type of retirement plan, Iwry explained simply that they exist already and thus can be leveraged by companies that do not want the cost, liability and administrative work of a qualified plan. Though no employer contributions and very little work would be required, employers would still be given a tax credit to offset any perceived burdens. Critical to Iwry’s proposal is that employers would be required to make these IRA plans available, since a voluntary system would have minimal impact and would not address the critical issue of coverage.
NAPA’s Brian Graff noted that a mandatory requirement would address distribution, which is one of the big issues and costs for the small business market. Iwry agreed, but was quick to point out that enrollment into the auto-IRA by the employees would not be required -- although they would have to make a decision one way or the other.
Open to ideas on how to make his proposal better, Iwry addressed ideas including additional incentives to employers for every employee that signs up and providing a government match to employees based on how much they contribute rather than their tax rate, which might be low for many uncovered workers.
With tax reform, a potential government shutdown and the looming debt ceiling -- as well as a particularly partisan environment in Washington -- other issues like Iwry’s auto-IRA have taken a back seat for the moment. But the issue of coverage is critical and is on the minds of many congressional leaders, including Sen. Ben Cardin (D-MD) who also spoke at the NAPA DC Fly-In.
Several states, including Maryland and California, are proposing their own auto-IRA program as the DOL grapples with the MEP issue. Along with the “Starter 401(k)” bill recently proposed by Sen. Orrin Hatch (R-UT), all of these ideas are intended to make simple, low-cost, employer sponsored retirement plans available to more workers.
