Obama Proposes Retirement Account Program That May Require Employer Action
If the president gets his way, employers who do not offer retirement plans may need to begin managing a new program that gives employees access to a savings account.
In his State of the Union address last night, Obama unveiled a new idea called “myRA,” which he billed as a starter savings account that would give Americans without access to an employer-sponsored retirement account a way to save money for retirement.
“While the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s,” Obama said in his State of the Union address Tuesday. "MyRA guarantees a decent return with no risk of losing what you put in.”
Details on how the program would be run are scant so far, but what the White House did say in a fact sheet is that the savings account would be “available through employers.” The Treasury Department will be responsible for administering the program.
And while this could spell significant new administrative work on the part of small-business owners, keep in mind that many a plan has been unveiled to much pomp and circumstance during many a State of the Union addresses and then have amounted to nothing. After all, this is politics.
That said, retirement savings – or a lack thereof -- is a critical issue for many Americans. About two-thirds of workers in the U.S. report that either they or their spouse has some money saved for retirement, according to a 2013 survey from the Employee Benefit Research Institute. However, even though a majority of American workers seem to know they should be saving for their elder years, they are certainly not saving enough money to live on. Half of workers say they have less than $25,000 in total savings and investments (outside of the value store in their residence) and 28 percent have less than $1,000 in savings.
One Washington, D.C.-based small-business advocacy group expressed concern over the potential burden such a program would place on Main Street. “NSBA supports making retirement savings easier, but warns that automatic IRAs put the administrative and financial onus squarely on small firms,” said Molly Brogan Day, the vice president of public affairs for the National Small Business Association, in a statement.
Another small-business group felt largely neglected by the president in the State of the Union address last night. "America's small businesses did not feature significantly in the SOTU speech,” said Beth Solomon, president and CEO of the National Association of Development Companies, in a statement. She did indicate that she was glad to have a new head of the Small Business Administration named. “While we are disappointed that the president did not address these issues directly in his speech this evening we are encouraged by his recent appointment of Maria Contreras-Sweet as sign of his enduring commitment to the small business community.”