House Considers Auto-Enrollment Legislation

The proposed bill would require nearly all US companies to enroll workers in a retirement plan.


The House Ways and Means Committee is continuing to work on legislative proposals under the budget reconciliation process that would require companies without employer-sponsored retirement plans to automatically enroll their workers in individual retirement accounts (IRAs) or 401(k)-type plans.

The bill is part of President Joe Biden’s “Build Back Better” agenda, which aims to create jobs, cut taxes, and lower costs for working families, while changing the tax code to require the wealthiest individuals and large corporations to pay more in taxes.

“The Ways and Means Committee will put an end to the idea that only some workers are worthy of ‘perks’ like paid leave, child care, and assistance in saving for retirement,” Ways and Means Committee Chairman Richard Neal said in a statement.

The proposed automatic enrollment requirement would apply to companies with five or more employees that have been in business for at least two years, and would grandfather in employers that already maintain a qualified retirement plan. Participation in an existing state program that requires employers to enroll employees in workplace savings arrangements would also satisfy the requirement.

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The bill also sets target-date funds (TDFs) as the default investment, and requires available investments to include those and only principal preservation funds and balanced funds with no other investment alternative allowed. Employers that do not comply with the requirements would be subject to an excise tax of $10 per day per employee not covered by an automatic contribution plan or arrangement.

In addition to requiring employers to automatically enroll their employees in a retirement plan, the legislation would make the Saver’s Credit refundable so that people without any income tax liability would be eligible to receive the benefit in the form of a contribution to their retirement account. It would also designate Roth IRAs as the default form of retirement plan unless the participant decides otherwise. 

The proposed legislation is the latest in a slew of bills that have been introduced or reintroduced this summer that aim to boost retirement savings for Americans.

Last month, US Sens. Cory Booker, D-New Jersey, and Todd Young, R-Indiana, reintroduced four bills they say will help increase retirement security for individuals and families. And in July, Sen. Patty Murray, D-Washington, and Rep. Lauren Underwood, D-Illinois, reintroduced the Women’s Retirement Protection Act of 2021, which aims to help close the retirement gender gap by addressing the financial challenges that disproportionately affect women.

Related Stories:

Senators Reintroduce Bills to Bolster Retirement Savings

US House Eyes Improving Small Employer Retirement Plans

Senate Bill Targets Women’s Retirement Savings Inequities

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