The White House today released their vision of actions required to update the US Retirement System and allow for greater portability of earned benefits. These were alluded to during the recent state of the Union Address.
The President said, “And for Americans short of retirement, basic benefits should be just as mobile as everything else is today. Even if he’s going from job to job, he should still be able to save for retirement and take his savings with him.”
According to the White House, “While Social Security remains a rock-solid guaranteed benefit that every American can rely on; Americans are increasingly responsible for their own retirement security.”
Workers are not as likely as they once were to spend an entire career with one company and enjoy a pension from that company. Workers in the new economy may work for many employers in the course of a career. This change requires Americans to rethink and rework the safety net to better protect workers.
The President hopes to work with the Congress to ensure “near universal access to workplace retirement savings accounts and put us on a path to a more portable retirement benefits.”
Access to workplace retirement savings plans is key to workers’ future economic security. One out of three workers does not have access to a retirement savings plan. Contractors and temporary employees are often unable to participate in employment-based plans. Fewer than 10 percent of workers without access to a workplace plan contribute to a retirement savings account on their own.
The President’s proposals would encourage and enable more employers to offer plans such as a 401(k), while creating alternative savings arrangements so workers can save for retirement at work even if their employer does not offer a plan.
The President wants to make it simpler for small businesses to offer plans, and to make it more cost effective for them to do so. President Obama’s budget proposal triples the existing “startup” credit, so small employers that newly offer a retirement plan would receive a tax credit of $1,500 per year for up to three years. And because auto-enrollment is the most effective way to encourage workers with access to a plan to participate, small employers that already offer a plan and add auto-enrollment would also get a tax credit of $500 per employee per year for up to three years.
In addition to encouraging employers to offer traditional retirement plans such as a 401(k), the Administration has taken steps to increase the availability and use of IRAs and help workers save by automatically enrolling them in these accounts.
Much work remains to ensure retirement benefits are as mobile as today’s workforce. These steps along with more detailed proposals in the budget should go to ensure income security for American Seniors into at least the medium term future.