In the News

In reintroducing his bill to require businesses with 10 or more employees that don't offer a retirement plan to automatically enroll their workers in IRAs or 401(k)-type plans, Rep. Richard Neal, D-Mass., said his focus is on getting more Americans to save for retirement, especially economically struggling workers.

"As much as I'd like to have a defined benefit initiative, the reality is that continuing to enhance retirement savings through the tax code makes enormous sense," Neal, the ranking member on the House Ways and Means Committee, said in an interview. "My plan here and the goal is to enhance retirement savings for people at the lower end of economic spectrum and/or those who are in a workplace where a retirement plan is not offered."

Neal on Feb. 7 reintroduced the Automatic IRA Act of 2024. The bill would require employers with more than 10 workers to either set up a 401(k)-type retirement plan or facilitate auto IRAs, and would generally apply to plan years beginning after 2026. Under the bill, 401(k)-type plans must automatically enroll employees at a default contribution rate of 6%, automatically increasing by 1 percentage point annually until reaching 10%. The contribution rate could also start at a higher percentage — a maximum of 10% the first year — and reach up to 15% thereafter, according to a summary of the bill from the Ways and Means Committee Democrats. Employees could choose not to contribute, and the Treasury Department would be directed to create rules pertaining to the implementation of automatic escalation.

Employers would have the option to select a provider of an auto IRA arrangement to which employee's elective contributions would be sent.

The default contribution rates for auto IRAs would be set at 6% in the first year, 7% in the second year, 8% in the third, 9% in the fourth and 10% for every year thereafter. Employees could choose between a traditional IRA or Roth IRA, with the default choice being a Roth IRA, or employees could choose to opt out altogether.

"My sense is this is an ideal opportunity for employers, community bankers, credit unions and others to begin to provide this benefit," Neal said.

The legislation would also create a new tax credit for small businesses — those with less than 100 employees — that facilitate auto IRAs, allowing $500 per year for three years, applying to tax years starting after 2024.

Neal said the new tax credit coupled with existing tax credits for small employers established in the SECURE Act and SECURE 2.0 — two comprehensive retirement security packages Congress passed in 2019 and 2022, respectively — will help offset costs for employers.

"We have this opportunity in the tax arena and at the Ways and Means Committee to use the tax system, tax credits in particular, to encourage employers to open up individual retirement opportunities, but also for companies that do not offer a plan and want to offer one for 10 or fewer employees," he said.

Neal last made a significant push to pass the bill in 2021 when Democrats were crafting and subsequently passed the Build Back Better Act, a large social spending package, but the auto IRA bill, and several other provisions were dropped during negotiations to lower the package's overall cost.

In the past, congressional Republicans have not supported the auto IRA bill over concerns of imposing a mandate on businesses.

Neal said the fact his bill uses tax credits to help employers set up plans "might enhance the prospects of getting this legislation advanced."

He added, "SECURE and SECURE 2.0 ended up being very bipartisan. I was a lead author for sure, but we were able to bring along Republican colleagues, and I think that this is the logical extension of what we're trying to do and that is to get the retirement plan into the hands of people who really need them."

When asked if he was confident the bill could pass, Neal only said that his work will continue.