President Obama is expected to touch on some aspects of retirement security during his State of the Union speech Tuesday night.
The proposals include a retirement savings plan for part-time workers, for employees of very small businesses, and changes in tax policy relating to IRA accounts.
The Obama administration plans to pay for these programs by closing tax loopholes for the nation’s top earners.
Insurance News Net explains the expected proposals:
The new proposals would give 30 million additional workers access to a workplace savings opportunity, according to an Administration fact sheet on his new program.
The proposals include:
* Auto-enrollment. Every employer with more than 10 employees that does not currently offer a retirement plan would be required to automatically enroll their workers in an IRA. Workers could opt out of saving, however.
* Tax cuts. Any employer with 100 or fewer employees that offers an auto-IRA would qualify for a $3,000 tax credit. Also, the existing “startup” credit would triple so that small employers that “newly offer” a retirement plan would receive a $4,500 tax credit to offset administrative expenses. In addition, small employers that already offer a plan and add auto-enrollment would get an additional $1,500 tax credit.
* Workplace retirement plans for part-time workers. Expand access for part-time workers by requiring employers who already offer plans to permit certain part-timers to make voluntary contributions to the plan. The affected part-timers would be those who have worked for the employer for at least 500 hours a year for three years or more. Currently, only 37 percent of part-time workers have access to a workplace retirement plan, the Administration says.
* Cap IRA account values. This proposal would prohibit contributions to, and accruals of, additional benefits in tax-preferred retirement plans and IRAs once the account balance reaches about $3.4 million. That amount is “enough to provide an annual income of $210,000 in retirement,” says the Administration, noting that some wealthy people have been using their accounts as if they were tax shelters. That includes 300 individuals who have accumulated more than $25 million each in their IRAs.
In last year’s SOTU address, the President proposed his MyRA program.
Photo by Jack Thielepape/jmtimages via Flickr CC License
