President proposes mandatory retirement plans

In its 2012 budget proposal, the Obama administration proposes new requirements for employer-sponsored retirement programs.
Under the proposal, employers that employ at least 10 workers and have been in business for at least 10 years would have two options:

  • Sponsor a retirement savings plan similar to a direct deposit IRA account, or
  • Provide automatic workplace pensions.

If an employer were to choose to set up an IRA-type account, employees would have to be automatically enrolled — unless they opted out.
Employer contributions (or matches) would not be required.
This proposal has appeared in previous budget proposals, as well as in legislation introduced in the House and Senate, but it has yet to gain traction.
If it fails yet again, don’t be surprised if similar proposals are attached to legislation in the near future.
Should the proposal pass as is this year, a tax credit of up to $250 per year for the first two years would be available to employers to help offset the administrative costs of establishing automatic IRAs.
Info: To view the 2012 budget proposal, click here.
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