Introduction of Automatic IRA Bill--Hon. Richard E. Neal

Floor Speech

INTRODUCTION OF AUTOMATIC IRA BILL -- HON. RICHARD E. NEAL (Extensions of Remarks - May 04, 2007)

* Mr. NEAL of Massachusetts. Madam Speaker, I rise to offer bipartisan legislation to create additional savings opportunities for workers who do not have access to qualified retirement plans through their employers. I am pleased to be joined by Rep. PHIL ENGLISH in offering ``The Automatic IRA Act of 2007,'' along with several other cosponsors, which will increase retirement savings for millions of workers.

* Over the years, Congress has improved incentives for employer-based retirement and pension plans by providing more flexibility, increasing the limits, and lessening the administrative burdens. Still, about one in four employees who have access to these successful retirement vehicles do not take advantage of them.

* What is a much more difficult group to reach, though, are the estimated 75 million workers who do not have access to these employer-based plans. That is why today we are filing legislation to create automatic payroll deposit Individual Retirement Accounts, or IRA's, for workers who do not have access to employer-provided qualified pension plans. Our bill would require employers to automatically enroll employees in an ``auto IRA'' unless the employee opts out. These are ``set it and forget it'' payroll deposit accounts. The non-partisan Retirement Security Project has estimated that this proposal could raise net national savings by nearly $8 billion annually.

* We are, of course, sensitive to any increased burden on small businesses, so the bill provides for a temporary tax credit for employers with less than 100 employees in order to offset the upfront administrative cost of establishing this program. Only employers with at least 10 employees, which have been in business for at least two years, would be covered by the bill. Further, the bill does not mandate any matching contributions by employers or any fiduciary responsibility for the management of the accounts. It is our sincere hope that once employers start participating, they will decide to convert these arrangements to the broader 401(k) plans. The IRA contribution limits are much lower than the 401(k) limits, so business owners may see incentives to switch to the bigger plans.

* Employers have the option of choosing a private sector manager for the auto IRA's, but allowing each employee the right to transfer, or simply allowing the employee to designate the provider at the outset. As a default, an option similar to the successful and popular Thrift Savings Program would be established.

* The automatic enrollment feature is not new. It builds upon the success of 401(k) auto enrollment, promoted by the Pension Protection Act of 2006. Many of the workers who will benefit from our bill will likely be moderate to lower-income workers. The proposal, which was jointly developed by Brookings Institution and Heritage Foundation scholars, has garnered widespread support, including AARP and the Minority Business Roundtable, and has been endorsed in New York Times editorials and by the Washington Times' lead political correspondent.

* Of the 75 million American workers who have no access to an employer plan, over 40 million work for employers of at least 10 employees. And, only 10% of these workers actually seek out their own IRA's or other retirement savings vehicles. The auto IRA bill that we are proposing will reach this critical group of workers and hopefully help them start on the road to retirement security. We urge our colleagues to join us in supporting ``The Automatic IRA Act of 2007.''

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