[Congressional Record (Bound Edition), Volume 156 (2010), Part 11]
[Extensions of Remarks]
[Page 15493]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   INTRODUCTION OF AUTOMATIC IRA BILL

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                          HON. RICHARD E. NEAL

                            of massachusetts

                    in the house of representatives

                        Tuesday, August 10, 2010

  Mr. NEAL. Madam Speaker, I rise to offer 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 several of my colleagues in offering ``The Automatic IRA Act 
of 2010,'' which will increase retirement savings for millions of 
workers. This proposal is based on one contained in the President's 
budget.
  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. GAO estimates that half the private sector workforce has 
no access to an employer-provided retirement plan. That is why today, 
we are filing legislation to create automatic payroll deposit 
Individual Retirement Accounts, or Auto IRAs, 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. Recent research from Fidelity showed that 
only one in 10 workers eligible for automatic enrollment in employer-
provided plans proactively opted out of the plan. The non-partisan 
Retirement Security Project has estimated that the Auto IRA proposal 
could raise net national savings by nearly $8 billion annually.
  This is especially important for younger and low-income workers, as 
GAO projects that under current law, 37 percent of all workers will 
retire with zero plan savings, and of young and low-income workers, 63 
percent will have no plan savings at retirement. According to a 
``retirement ready'' study from the Employee Benefit Research Institute 
(EBRI) released last month, 64 percent of workers earning less than 
$30,000 a year will run out of money within 10 years of retirement. And 
this problem exists even among large employers with qualified plans. A 
recent study by Hewitt projecting the retirement needs of 2.1 million 
employees of 84 large employers finds that the baseline case for full-
career contributing employees will only meet about 85 percent of their 
predicted retirement needs at age 65.
  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 up-front 
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 IRAs, while allowing each employee the right to transfer, or 
simply allowing the employee to designate the provider at the outset. 
As a default, employers may also send these contributions to the 
Treasury Department for the purchase of newly created Retirement Bonds, 
or R-bonds. Employer-provided retirement plans are highly popular among 
workers, and in a 2009 survey for AARP, by two to one, respondents said 
employers should be required to provide a retirement savings plan for 
their employees. This bill merely requires the employer to set up the 
mechanism for employees to save on their own.
  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. GAO recently studied the 
impact of auto-enrollment on workers savings levels and found that 
universal access to retirement savings with automatic enrollment would 
result in 91 percent of all workers, and 84 percent of low-income 
workers, with accumulated defined contribution savings at retirement. 
EBRI's ``retirement ready'' study found positive benefits already from 
auto-enrollment and auto-escalation of contributions in 401(k) plans, 
particularly for those aged 56 to 62 years old who have a 47 percent 
chance of not having enough money at retirement, down from a 60 percent 
chance just seven years ago.
  The Auto IRA 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 editorials around the country.
  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 percent of these workers actually seek out their own IRAs 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 2010.''

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