Automatic Individual Retirement Account

Floor Speech

Mr. NEAL. Mr. Speaker, I rise today to talk about a piece of legislation that I'm introducing later on in the afternoon, the Automatic Individual Retirement Account Act of 2012.

According to Boston College's Center for Retirement Research, the United States has a retirement income deficit of $6.6 trillion. This is the gap between what Americans need for retirement and the amount that they've actually saved. This amounts to more than $90,000 per household. This is a staggering number and demonstrates that we, as Americans, need to do more to prepare for a financially secure retirement. One area that I think we need to focus on is getting more low- and middle-income workers into a retirement savings plan, and the auto IRA would do just that.

It is estimated that 75 million Americans--half the American people who get up and go to work every day--are not in an employer-provided retirement plan or other opportunity to save through workplace contributions. The Auto IRA Act offers a commonsense solution to dramatically expand retirement savings in the U.S. Under this proposal, tens of millions of workers would be eligible to save for retirement through a payroll deduction. And it has been estimated that the auto IRA proposal could raise net national savings by nearly $8 billion annually.

This legislation would create 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 require employers to automatically enroll employees in the auto IRA unless the employee opts out. These are ``set it and forget it'' payroll deposit accounts.

I am sensitive to the increased burden on small businesses, so the bill provides for a tax credit for employers with less than 100 employees in order to offset the administrative costs of establishing this initiative. Furthermore, only employers with at least 10 employees, who have been in business for at least 2 years, would be covered by the bill. And the bill does not mandate any matching contributions by employers or other fiduciary responsibilities for the management of the accounts.

It's my hope that once employers start participating in the auto IRA program, they will decide to convert these arrangements to the broader 401(k) plans. The IRA contribution limits are lower than the 401(k) limits, so business owners may see incentives to switch to bigger plans. And we've also enhanced the small employer pension plan startup credit, so if an auto IRA employer switches from auto IRA to 401(k) plans, they would get the credit for 3 years instead of 2.

Listen to this, this proposal was jointly developed working with me through the Brookings Institution and the Heritage Foundation. It has garnered widespread support, including AARP, the United States Black Chamber of Commerce, the Women's Institute For a Secure Retirement, and the Aspen Institute Initiative on Financial Security. You should join in supporting this legislation.

I am also highlighting another retirement plan bill that I'm introducing today, the Retirement Plan Simplification and Enhancement Act. Our current retirement plan rules are very complicated. This bill includes a number of commonsense reforms that will simplify the rules while we still protect participants.

Under current law, small businesses that adopt a new retirement plan are eligible for a tax credit to cover some of their startup costs. We are tripling the credit to $1,500 to cover all of these expenses. I hope this will encourage more small employers to sponsor retirement plans.

Currently, employers can exclude some part-time workers from participating in their 401(k) plans. As women are more likely to work part-time than men, these rules can be quite harmful to them. So my bill would require employers to allow certain long-term, part-time employees to make elective deferrals to their 401(k) plans.

Both of these bills are commonsense reforms that will help Americans prepare for a good and financially secure retirement. I hope you will join on to the Automatic IRA Act of 2012 and the Retirement Plan Simplification and Enhancement Act.

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