Auto-Savings: Legislative Recommendations Aim to Automate Retirement Plans for Employees

Among the social infrastructure changes proposed by the Ways & Means Committee for the “Build Back Better Agenda” relating to retirement are reforms imposing an excise tax on employers for failing to maintain or facilitate automatic contribution plans or arrangements that enroll workers in IRAs, SIMPLE retirement accounts, or 401(k) retirement plans. The proposal would start employee elective contributions at 6% (adding Sections 414(aa) and 4980J to the Internal Revenue Code). Budget Reconciliation Legislative Recommendations Relating to Retirement, Section 131001. A contemplated excise tax would apply to deter offenders, equal to $10/day/employee during a noncompliance period. The retirement provisions are part of the social infrastructure additions to the budget reconciliation bill, which may include historic changes to both paid family medical leave, the private retirement savings system, and the refundable saver’s credit. See Ways & Means Committee, Markup of the Build Back Better Act, Subtitle B. While the initiative would cost the Fed, a number of tax increases would help pay for the savings initiative and other Build Back Better Agenda social initiatives.

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