Proposed bill would require small employers to provide retirement plan access

WASHINGTON, D.C. – Legislation introduced today would expand retirement savings opportunities for millions of workers by requiring businesses with ten or more employees to offer a workplace retirement plan.

The "Automatic IRA Act of 2024," introduced by Rep. Richard Neal (D-Mass.), requires employers with ten employees or more to provide or arrange for access to an automatic retirement contribution plan for all full-time and long-term part-time employees. Workers could decline to participate or drop out at any time after enrollment.

The Insured Retirement Institute (IRI) supports the legislation.

"We appreciate Rep. Neal's steadfast leadership and advocacy of this legislation to help America's workers, retirees, and their families build economic equity, strengthen financial security, and protect income in a sustainable manner to last throughout their retirement years," said Wayne Chopus, President and CEO at IRI. "We look forward to working with him and other supporters to enact this important measure."

Nearly half of America's workers are employed by companies that do not offer a traditional pension or a retirement savings plan, with about two-thirds of those workers at companies with ten or more employees. Nearly 64 percent of workers lacking access to an employer-provided retirement plan are Latino, 53 percent are Black, and 45 percent are Asian.

A study of the impact of such a new law on workers’ retirement security found that $7 trillion in additional retirement savings would be generated, and 62 million new retirement savers would be created over ten years. Ninety-eight percent of new savers would earn less than $100,000 annually, including seven million new Black savers and 10.8 million new Latino savers.

Additionally, the bill would expand opportunities to save for the 73.3 million American workers who participate in the gig economy. It directs the Secretary of the Treasury by regulation or other guidance to make workplace retirement plans available to individuals who provide services to an employer that do not constitute employment.

The legislation also would require employers to offer employees with at least a $200,000 vested retirement account balance the option to take a distribution of up to 50 percent of savings to purchase a lifetime income solution. This feature can provide a sustainable, protected income stream that cannot be outlived.

“The protected lifetime income provisions in this legislation will help address the anxiety many workers feel about outliving their retirement savings,” Chopus said.

According to IRI research, older workers are highly interested in having protected lifetime income solutions, such as annuities, included in defined contribution retirement plans. Seventy percent of workers aged 40-45 said they are very or somewhat likely to allocate a portion of retirement plan assets to annuities. Eighty-seven percent believe it is important that the income from savings is protected for life.

"Policymakers have created numerous incentives, options, and mechanisms for employers to offer workplace retirement plans," Chopus said. “But too many employees, particularly those who work for small businesses, are still not covered by a plan. This legislation is a common-sense step to address the inequitable access to effective means for accumulating retirement savings."

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 contained several bipartisan measures to facilitate the establishment of retirement savings plans for small businesses. The law included an expanded tax credit to cover some costs of setting up a plan. It also created pooled employer plans (PEPs) that small business employers can use to share a retirement plan's administrative burden and costs. These new tools will make it easier for small business employers to comply with the new requirements established by the Automatic IRA Act.

Rep. Neal, who has championed several retirement bills into law, first introduced the Automatic IRI Act in 2017. IRI has been a vocal advocate for the passage of this legislation, having been the first industry organization to support the measure. Since its introduction, the bill has been included in IRI’s Federal Retirement Security Blueprint as a key priority for America’s workers and retirees to expand opportunities to save for retirement.

"We urge Congress to advance this initiative," Chopus said. "This legislation will have a significant, positive effect on the long-term well-being of millions of small-business workers who will now have more opportunities to save for and achieve a secure and dignified retirement.”

Finseca also applauded the proposed bill.

"Congressman Neal's dedication to enhancing Financial Security for All is commendable," said Marc Cadin, CEO of Finseca. "The American people already face a $7 trillion gap in retirement savings, and according to estimates by LIMRA, we're also staring down a $12 trillion protection gap. With the insolvency of Social Security looming too, we're on the brink of a financial crisis, and the Automatic IRA Act of 2024 promises to boost retirement savings for millions, especially benefiting young and low-income workers lacking access to workplace savings. Furthermore, this expands on the efforts of Secure 2.0 and is exactly the kind of leadership we need to help Americans reach their goal of becoming more financially secure."

American Council of Life Insurers President and CEO Susan Neely made the following comment on the legislation:

“Expanding access to employer-based retirement plans is key to improving American workers’ retirement preparedness. Rep. Richard Neal’s ‘Automatic IRA Act of 2024’ does just that, providing even more people with the pathway to a secure retirement.

“ACLI estimates that more than 31 million workers will gain access to employer-based retirement plans if the legislation is adopted.

“Representative Neal’s bill represents a bold approach to boosting workers’ retirement savings.

“An employer-based retirement plan can go a long way toward building an adequate retirement nest egg. And with people spending decades in retirement, it is essential they plan and save as early and as much as possible so they don’t have to rely on Social Security alone for lifetime income.

“ACLI is proud to support the ‘Automatic IRA Act of 2024’. It is a powerful solution to addressing millions of workers’ retirement insecurity.”