Under the White House's latest proposal, revealed in the annual report on the Middle Class Task Force, the saver's tax credit would be simplified and expanded.
The expanded credit would match 50% of the first $1,000 of contributions ($500 for individuals) to retirement plans by families earning up to $65,000 and provide a partial credit to families earning up to $85,000, rendering more middle-class families eligible.
The proposal also would make the credit fully refundable, allowing lower-income savers to take advantage of the credit for the first time.
"The question is whether the administration will have the time to focus on (automatic IRAs) and make it happen," says Plansponsor's Adams, who believes "this may not be the right year to do that."
If the proposal does get the green light, he notes, it likely won't be implemented before 2012.
Enhanced saving features
The White House also has proposed making it easier for workers to save their federal tax refunds by allowing them to receive their refunds in the form of savings bonds that could be deposited into their IRAs or bank accounts.It announced a proposal to allow workers to put payments for unused vacation time and sick days into their retirement plans as well, an option not currently available to most workers.
401k fee disclosure
Another hot item on the legislative agenda is 401k fee disclosure.At present, employees are given precious little information about the fees and expenses associated with their retirement plans. Fees make a big impact on overall investment returns.
After countless failed attempts to implement reform, a bill that would increase the transparency of 401k fees for employees is widely expected to pass by the end of the year, says Wray, of the 401k council.
But guidance from the Labor Department on how employers should provide that information to plan participants could come sooner than that -- as early as this spring.
The White House recently announced its commitment to making the 401k system more reliable and transparent, and to give American workers and plan sponsors the information they need to get "investment, record-keeping and other services at a fair price."
Investment advice
One reason participation in employer-sponsored 401k plans remains low is that retirement savers can't make sense of their investment options and aren't willing to track down (or pay for) a financial adviser for help.Making matters worse, employers who wanted to help by providing independent investment advice often shied away because they were required to have third-party advice reviewed by the Labor Department to ensure the plan provider didn't benefit. This costs time and money.
The Pension Protection Act of 2006 created an exemption by which companies were once again free to offer third-party investment advice to workers if certain criteria were met to ensure the advice was objective.
The Labor Department was set to release guidelines early last year, but the Obama administration felt it did not go far enough to protect the interests of employees and sent regulators back to the drawing table.
In late February, the Labor Department proposed new regulations that will expand the availability of quality advice. It can be dispensed in one of two ways: through the use of an unbiased computer model or through an adviser who is compensated on a "level fee" basis, meaning the fees do not vary from one investment to another. The regulations contain safeguards to ensure information is unbiased.
The recent bear markets hit retirement savers hard, forcing millions to continue working and many others to return to the work force after having left. Yet the carnage on Wall Street also inspired a litany of new products and policies that are likely to help working Americans feather their nest egg for generations to come.
This article was reported by Shelly K. Schwartz for Bankrate.com.
Published April 15, 2010
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