There are a number of programs and proposals that seek to increase the number of people saving for their own retirement through workplace retirement plans. These include programs run by states for private sector workers, new tax incentives, and measures making it more attractive for employers to offer plans.
State-run retirement savings plans for private-sector workers.
States around the country are undertaking to administer retirement savings plans for private-sector workers. Thus far 10 states and one city have enacted legislation authorizing these new programs. Most of these programs require employers who do not have other retirement plans to enroll their employees into Individual Retirement Accounts administered by the state. The employers are required to reduce the employees’ earnings by a specified amount and put the money in the state-run program unless the employees say they do not want to participate in the program. Another 33 states and another city are considering adopting similar types of programs.
A refundable Saver’s Credit for lower-income employees.
Currently, workers earning lower incomes can get tax credits for money that they put into an IRA or a 401(k) plan. This is called the Savers Credit. A problem is that many lower-income employees do not pay taxes. A “refundable” Savers Credit would give workers who contribute to retirement plans money even if they don’t pay taxes. Proposals for refundable Saver’s Credits have been included in proposed legislation.
Tax credits and pooled retirement savings arrangements for small employers.
Legislation is now pending that would provide new tax incentives for small employers to offer 401(k)s and other retirement savings plans and to allow unrelated employers to join together to offer pooled 401(k) plans sponsored by financial institutions.