House Budget Reconciliation Text Includes Retirement Reform
The House Ways and Means Committee has released draft legislative text as part of what is currently planned to be a $3.5 trillion tax and spending package. The proposal would require employers without an employer-sponsored retirement plan to automatically enroll their employees in an automatic IRA plan or other retirement arrangement at a rate of at least 6 percent and increasing annually to 10 percent of compensation beginning in 2023. Representative Richard Neal (D-MA) previously proposed such legislation under the Automatic Retirement Plan Act of 2017. The current proposal exempts employers with 5 or fewer employees earning at least $5,000, or those that have been in business for less than 2 years from these requirements. The legislation includes enhancements to credits for small employers to offset plan costs and imposes an excise tax of $10 per participant per day to employers that fail to provide an automatic arrangement.
Additionally, the proposal would modify the saver’s credit to create a refundable tax credit or “saver’s match” of up to $500 (adjusted for inflation), based on a percentage of the contributions made by the taxpayer to a retirement account. The taxpayer would designate on his or her tax return an eligible retirement account for the credit to be funded. Similar proposals have been introduced by Senator Ron Wyden (D-OR) with the Encouraging Americans to Save Act of 2021, and also by Senator’s Ben Cardin (R-MD) and Ron Portman (R-OH) as part of the Retirement Security and Savings Act of 2021.
The House Ways and Means Committee is scheduled to hold markup sessions this week to debate the legislation.