President Obama’s budget for fiscal year 2011 includes many proposals aimed to help workers prepare for retirement. Here’s a look at the retirement projects the White House is asking Congress to fund.
Automatic IRAs. Companies that don’t offer a retirement plan may soon be required to enroll their employees in an IRA account. Under Obama’s current proposal, 3 percent of employee pay would be direct-deposited into a Roth IRA, the default savings vehicle. Workers may opt out, chose a traditional IRA, or elect to save a different amount. Small firms with 10 or fewer employees or companies that have been in business less than two years would be exempt from participation.
Employers could claim a temporary tax credit upon automatically signing their workers up for the IRA for $25 per enrolled employee up to $250 for two years. Another tax credit would be available to small businesses that begin their own retirement plan equal to 50 percent of the start-up expenses for establishing or administering a new retirement plan up to $1,000 per year for three years, an increase from the $500 businesses are eligible for under current law. The proposal would become effective in 2012.
A government 401(k) match. The Obama administration is proposing expanding the Saver’s Credit in 2011 to provide a 50 percent match on the first $500 of retirement savings for individuals who earn less than $32,500 annually. Couples who take home less than $65,000 could receive a match on their first $1,000 of savings and the match would be gradually phased out for couples with income between $65,000 and $85,000. The maximum credit would be $250 for a single filer and $500 for a married couple and be fully refundable.
New 401(k) regulations. The White House supports adding more consumer protections to 401(k)s. The administration is calling for legislation that will require a transparent list off all 401(k) fees charged and disclosures about how target-date funds work. The Department of Labor also aims to streamline the process for workers to annuitize their retirement assets and outline who can give retirement savers investment advice to prevent conflicts of interest.
More Social Security funding. Obama’s budget allocates $12.5 billion to the Social Security Administration, up 8 percent from 2010’s budget. The increase in funding is primarily to boost the number of employees, who will focus on processing retirement and disability claims and disability appeals faster. Also, $796 million is designated to scrutinize Social Security payments to make sure that only eligible beneficiaries receive checks and are paid the correct amount.
Caregiving assistance. The Administration on Aging would be given $103 million, according to the budget, for a Caregiver Initiative that will allocate funds to agencies that provide senior and caregiver support services such as transportation and adult day care.