President Clinton, speaking today at a national summit on retirement savings in Washington, clarified employers may automatically enroll employees in 401(k) retirement plans unless employees opt out. Under current law, most employers require employees to specify if they wish to participate in 401(k) plans. ``Employers will be able to make use of inertia to encourage retirement savings,'' said Vicki Judson, a Treasury Department consultant.
A number of large companies already use the default option, she said, but some employers worried about running afoul of current rules. The clarification does not affect a company's eligibility requirements, such as a one-year waiting period for participation in a 401(k) plan.
Also at the summit today, Sen. Charles Grassley, R-Iowa, announced plans to introduce bipartisan legislation with Sen. Bob Graham, D-Fla., that will further expand pension coverage, make it easier for workers to take their retirement savings from job to job, and cut through complicated pension regulations. They last year introduced legislation, which was incorporated in the Taxpayer Relief Act of 1997. Meanwhile, Rep. Earl Pomeroy, D-N.D., yesterday introduced the Family Savings Credit Act, which would give low-income families a tax credit for up to $1,000 or half of their annual IRA contributions.