Auto-IRA, Saver’s Credit Provisions of $3.5 Trillion Spending Bill Pass Key Committee

There is no question that boosting retirement savings is not only a good idea but essential, but I’m not sure this is the best way. For many employers this will be an administrative nightmare. For many workers confusion will be the order of the day.

I wonder how politicians rationalize their rhetoric that half of Americans are living paycheck to paycheck while at the same time seek to make saving up to 10% of pay automatic? The reality is the paycheck to paycheck claim is not real.

Should this become law, banks and other financial groups who already have administrative capability in this field will see a windfall.

Auto IRA provision Specifically, the automatic IRA proposal would require employers that have been in existence for at least two years, do not sponsor a retirement plan, and employ five or more people to automatically enroll those employees in IRAs or 401k-type plans. To offset administrative costs, employers would receive a tax credit.

Starting on Jan. 1, 2023, the provision would require employers to deduct at least 6% from employee paychecks and automatically increase that savings rate by 1% per year until reaching 10%. Employees would be free to opt out or change their savings rate.

Companies with five or fewer employees and those which have been in business for less than two years would be exempt from the requirement. The mandate wouldn’t cover employees under 21 and would require employers to automatically enroll part-time employees working more than 500 hours a year for at least two consecutive years.

Companies that fail to comply would be fined $10 per employee per day for up to three months.

Source: Auto-IRA, Saver’s Credit Provisions of $3.5 Trillion Spending Bill Pass Key Committee – 401K Specialist


  1. “For many workers confusion will be the order of the day.”
    I agree. For a number of years after I retired, I was involved with AARP/VITA as a volunteer tax preparer. On more than one occasion I had bad news for people. When the stock market was hot before the 2007 debacle people with little financial acumen had piled into mutual fund IRAs. When the market tanked, they bailed out and didn’t find out until tax time the following year that they owed a 10% penalty on top of the now realized loss. Their next question was “Why didn’t the bank tell me this would happen when I took my money out? I can see this happening again since I believe many people will view their retirement account as their emergency fund.

    Liked by 1 person

  2. Well, it sounds like the politicians listen to you. Save first whether you want to or not.

    I think they might have been just a “little better” at privatizing Social Security, not that I am a fan of that either. With Social Security, it is account that you can’t withdraw money from period until retirement age.

    What I see happening is since the average time a person keeps a job is 4 years and this is going to affect mostly low wage earners at small companies, I see people cashing out when they change jobs instead of rolling over. Or when reaching age 59 1/2, withdrawing everything and buying a boat or something.

    I also believe that since stock brokers have lost a lot of market share to low cost online brokers, I see high fee IRAs management companies popping up to help the small business owners that don’t understand this or have time for the paperwork. I also see a small percentage of employees getting fired or quitting, and over time losing track of their IRAs from early in their employment or the IRA holding institutions losing contact information. The cost to higher that 5th employee has just skyrocketed. But I do see a boom of employment for those under 21.

    I do see the problems but in my opinion, workers have plenty of ways to save. I rather that they fix Social Security first than this. These non-savers will probably end up getting most of their retirement income from Social Security in the end.

    Liked by 1 person

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