A proposal to require employers that don't offer retirement plans to automatically enroll employees in individual retirement accounts or 401(k)-type plans could be a "game changer" for the nation's retirement landscape, sources said.
But while retirement security is typically one of the few bipartisan issues left in Washington, the automatic retirement plan proposal only has the backing of Democrats, which could complicate future negotiations on retirement security legislation, like a SECURE Act 2.0 package.
The House Ways and Means Committee in a 22-20 vote advanced the automatic retirement plan proposal on Sept. 9. The vote was part of a markup where the committee considered a series of legislative proposals under a budget reconciliation process. The markup was part of Democratic efforts to pass a $3.5 trillion social spending plan aimed at addressing climate change; expanding Medicare, paid family and medical leave and child-care options; and establishing universal prekindergarten, among other items.
If signed into law, the measure — which would take effect Jan. 1, 2023 — would require employers to offer a 401(k) or IRA, with exceptions for governments, churches and companies with five or fewer employees or less than two years in business. It does not cover employees under 21, and any employee can opt out.