The House Ways and Means Committee this week will consider a measure to require employers that don’t offer retirement plans to automatically enroll their employees in individual retirement accounts or 401(k)-type plans.
Chairman Richard Neal, D-Mass., announced Tuesday that his committee on Thursday and Friday will markup, or consider, a series of legislative proposals under a budget reconciliation process. The markup is part of Democrats’ efforts to pass a $3.5 trillion social spending plan aimed at addressing climate change, expanding Medicare, paid family and medical leave and child care options, and establishing universal prekindergarten, among other items.
Mr. Neal has long sought to expand retirement coverage. In December 2017 he introduced the Automatic Retirement Plan Act, on which the provision now under consideration in the reconciliation package is based.
“I’m not particularly surprised to see this in the bill, it’s one of his top priorities,” said Michael P. Kreps, Washington-based principal and co-chairman of Groom Law Group’s retirement services practice, of Mr. Neal. “The fact that they’d be effectively creating near-universal coverage means you’ll have a lot more people saving.”
The provision would require many employers to offer a 401(k) or IRA, with exceptions for governments, churches and companies with five or fewer employees or less than two years in business. It does not cover employees under 21.
Employer contributions would not be required, but failure to offer a plan would incur an excise tax.
The provision would also require plans to offer participants with more than $200,000 in their accounts an option to take a distribution of at least 50% of their vested account balance in the form of a protected lifetime income solution.
The committee will also consider a provision to make the saver’s credit refundable so that people without any income tax liability are eligible to receive the benefit in the form of a contribution to their retirement account.
“This is our historic opportunity to support working families and ensure our economy is stronger, more inclusive and more resilient for generations to come,” Mr. Neal said in a news release.
Using the reconciliation process means Democrats need only a simple majority to pass the bill in the Senate instead of the usual 60 votes. Republicans have widely criticized the $3.5 trillion package, and none are expected to support it in either chamber.