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Small businesses would be able to band together to create a joint 401(k) retirement plan, and some part-time workers could participate in their employer’s plan, under proposals to be included in President Obama’s final budget to Congress.
An outline of these and other proposals to expand access to retirement accounts to more than 30 million people was released Jan. 26. More details, along with cost figures, will be available when the president submits his budget next month.
Some ideas are new, while some have been proposed before. Among them:
- Allowing small businesses in unrelated fields to create a 401(k) together would keep costs lower than if each launched a plan of its own. Similarly, certain nonprofits also would be able to set up a pooled plan for contractors and self-employed individuals without a retirement account on the job.
- Employers that set up a new retirement plan would get an annual $1,500 tax credit for up to three years. Small employers with an existing plan could receive a $500 credit for up to three years by adopting automatic enrollment, meaning new employees would be added to the plan unless they opt out.
- Employers would be required to allow long-term, part-time workers who have worked at least 500 hours in the year to participate in the company retirement plan.
- Nonprofits and states could receive funding to design, implement and assess new approaches for making retirement plans and other employer-sponsored benefits more easily transferable from job to job.
- Employers with more than 10 workers and no retirement plan would be required to automatically enroll them into an individual retirement account.
In the past, AARP has supported auto-enrollment, more coverage for part-time workers and making it easier for companies to pool their retirement accounts.
“These are all steps in the right directions,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. “They need to be passed.”
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But congressional agreement on these proposals is unlikely during a presidential election year, said Marc Goldwein, a senior vice president at the Committee for a Responsible Federal Budget, a nonprofit, bipartisan public policy organization. Still, with wide acknowledgment that more should be done to help people save for retirement, Goldwein added, the next president or the next Congress might take up these proposals.
Photo: Jason York/iStock
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