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CCH® PENSION AND BENEFITS — 5/21/07

“Automatic IRA” bill introduced in House and Senate

Legislation has been introduced in Congress to require employers without retirement plans to establish automatic payroll deposit IRAs for their employees. The Automatic IRA Bill of 2007 (H.R. 2167) was introduced in the House by Representatives Richard Neal (D-MA) and Phil English (R-PA). A similar bill was introduced in the Senate (S. 1141) by Senators Jeff Bingaman (D-NM) and Gordon Smith (R-OR).

Would cover employers with more than 10 employees

The bill would require certain employers to offer all eligible workers the option to put a portion of their wages into an automatic IRA account through payroll deductions. The bill would apply to employers with more than 10 employees that have been in business for at least two years and that do not offer a retirement plan for their employees. Under the bill, employers would be able to choose the type of IRA option for their employees. Employers could establish accounts for all employees at one institution or allow employees to establish their own accounts. Alternatively, if the employer does not want to use a regular, private provider IRA, it could opt to use the safety-net option: a private-sector provider contracted by the federal government’s Thrift Savings Plan (TSP II) Board. To offset the administrative costs associated with establishing the payroll deduction, small businesses with less than 100 employees would receive a tax credit of up to $250 for the first two years of the program.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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