US. Hidden In The Reconciliation Bill: A Retirement Plan Mandate That Will Take Most People By Surprise
By Elizabeth Bauer
Readers, I am embarrassed to admit that a radical change to our retirement system, tucked into the “Build Back Better” Budget Reconciliation bill, wholly escaped my notice until just recently. As explained by Ashlea Ebeling, also at Forbes,
“Under the proposal, starting in 2023, employers with five or more employees would have to offer a retirement plan and automatically enroll employees, diverting 6% of their pay to a retirement account. An automatic escalation clause would increase the automatic contribution to 10% of pay by year five. The default plan would be a Roth IRA invested in a target-date fund, a mix of investments based on your expected retirement year.
“For employers, it’s a mandate. They would have to offer the plans. Employees would be able to opt out.”
For employers who already offer a 401(k) or similar plan, nothing would change; this is targeted at small employers who do not now offer any such plan.
In some respects, this would be similar to the autoenrollment plans now in operation or under implementation in Oregon, California, Illinois, and elsewhere. In Oregon, for example, employees are defaulted into participation in a state-managed IRA, starting at a contribution level of 5% and increasing to 10%, but with employees able to adjust their contribution or reject contributing entirely.
Read more @Forbes
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