One small business lobby is raising objection to a portion of President Obama’s middle-class tax proposal: the effort to increase retirement savings by requiring all businesses to offer automatic individual retirement accounts.
Obama said the plan, part of a tax package aimed at middle-income Americans proposed Tuesday, would let employees automatically enroll in direct-deposit retirement accounts and expand matching tax credits. The administration hasn’t released a cost estimate.
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“When small businesses are struggling to stay afloat, we oppose mandates such as this that stand to create a new administrative burden,” said Molly Brogan, vice president of public affairs for the National Small Business Association.
Sixty-four percent of small-business owners said revenue declined in the past 12 months, the highest percentage since 1993, according to a December national survey of 450 small-business owners conducted by the NSBA, which represents more than 150,000 small businesses. “I don’t know that there’s been enough thought to how certain small businesses, restaurants in particular, would comply with this if they don’t use a payroll company or participate in direct deposits,” Brogan said.
Almost 80 million Americans don’t have retirement accounts through their employers, according to the government. Sixty-three percent of low-income workers may have no savings at retirement to supplement Social Security, according to a report by the Government Accountability Office.
“The automatic IRA has the advantage of being able to fill in the gap,” said David C. John, who developed an automatic-IRA proposal with Mark Iwry, now deputy assistant treasury secretary for the Retirement Security Project, a joint venture of Georgetown University’s Public Policy Institute and the Brookings Institution in Washington.
A worker automatically enrolling in a retirement savings account would likely make contributions through payroll deductions into one of several investments, John said. The accounts would likely be Roth IRAs where taxes are paid upfront to lower the budgetary cost rather than taxing withdrawals during retirement. Employees would be able to opt out of the savings program, John said.
Employers would have access to a Web site created by the government that would help them find a bank, brokerage firm or mutual fund company to administer the accounts. A freelancer or contract employee would also have the opportunity to participate, he said.
Sen. Jeff Bingaman, D-N.M., and Rep. Richard Neal, D-Mass., previously introduced bills to establish automatic enrollment in IRAs. Bingaman is working on a new version of the bill, spokeswoman Jude McCartin said.
“We expect that a final bill will be ready for introduction in the coming weeks, and the goal will be to get it enacted before the end of the year,” McCartin said.
