Changes that President Obama will propose to employer-sponsored retirement plans could help 30 million American workers have access to retirement savings. In the announcement on Monday, president Obama proposed, in his new 2017 budget, rules that would make it easier for small businesses to join together to form 401(k) retirement plans for their workers, even if the businesses are in different industries.
Small businesses can already band together to form a retirement plan, though officials said that current law discourages them from doing so if the businesses are not closely related. They noted that some independent auto dealerships have united to create retirement plans for their workers, allowing the businesses to share costs.
The president proposed specific legal changes to promote the broader use of the program, often called an open multiple employer plan. Officials said the changes would clarify “decades of precedent, both case law and guidance,” that currently stands in the way of such plans.
Obama’s plan consists of of a number of legislative proposals, which he’ll outline in the 2017 budget he’ll submit to Congress next month. They include:
- Offering tax credits to small businesses that automatically enroll employees in a new 401(k)-style retirement plan — or requiring them to offer payroll deductions to an Individual Retirement Account if they don’t offer a company plan.
- Requiring companies with existing plans to offer them to long-term, part-time workers who work 500 hours a year for three years; and
- Making it easier for companies to pool their retirement plans to bring down expenses through multiple employer plans.
In addition to the 401(k) proposal, President Obama’s budget will include other modest retirement initiatives, including one that would require businesses with more than 10 employees to automatically enroll their workers in an IRA program, if the businesses do not offer a separate retirement savings program.
That proposal has been part of the president’s budget in the past, but officials said they hoped Republicans would support it this time. The budget will also seek funding for pilot programs that would provide new ways for people who change jobs to shift their retirement savings into programs offered by their new employers.