Bill to upgrade 401(k)

[Lee Borgersen]

House committee unanimously passes bill to upgrade 401(k) plans amid 'retirement income "crisis" !

What crisis!.....

  ...
The most comprehensive changes to private retirement plans in more than a decade are gaining momentum in Congress.
A key House committee on Tuesday passed a bill intended to increase the flexibility of 401(k) plans and improve access to the accounts, particularly for small businesses and their employees.
 
The proposal, known as the Secure Act, was backed by the top Democrat and Republican on the tax-writing Ways and Means committee.It was approved unanimously.
"Americans currently face a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty," committee Chairman Richard Neal (D-Mass.) said Tuesday.

The bill is one of the few proposals with a significant chance of becoming law amid a bitterly divided Congress. Elements of the bill have been debated among members for years and enjoy wide support among both industry groups and advocacy organizations. On Tuesday, Neal called the legislation "a major bipartisan accomplishment."

"The Ways and Means committee is where we find solutions and get things done for the American people," he said.
The bill includes a host of provisions aimed at encouraging small businesses to provide private retirement benefits to their workers. It allows them to band together to offer 401(k)s and creates a new tax credit of up to $500 for companies that set up plans with automatic enrollment. Businesses with long-term, part-time workers must also allow them to become eligible for retirement benefits.

In addition, the bill includes several measures that would affect other types of savings. It repeals the maximum age for IRA contributions and raises the age for required mandatory distributions from 70 1/2 to 72. It also expands the use of 529s, from only college-related expenses to include private schools, home schools and student loans.

 

Here's what needs to change on the 401(k)......
The last time Congress passed major retirement legislation was in 2006. The Pension Protection Act focused on underfunded accounts and reforms to that system. Since then, lawmakers have debated proposals to address the popularity of 401(k)s and individual saving accounts.

But those efforts have stalled on their own, said Paul Richman, chief government officer at the Insured Retirement Institute, a trade group. He said the Secure Act aims to "modernize" the system.

"It's packaging them all into a comprehensive piece of legislation that would address many of these little issues that have cropped up over the years," he said. "We think that it's a good chance for Congress to take some positive, bipartisan action and advance this bill."
The Senate Finance committee introduced a companion bill late Monday. It is expected to pass with backing from both sides of the aisle.

"There's a lot of pent-up momentum for this, and that's why it's so bipartisan in nature," said Shai Akabas, director of economic policy at the Bipartisan Policy Center, a think tank. "They're now getting to the point where there's momentum to get it across the finish line in both the House and the Senate."

In the House, Neal said he is also working on a second retirement bill with ranking Republican Rep. Kevin Brady of Texas. He said he hopes the committee will consider that legislation before Congress goes on recess in August.

Video discussion.....

[deadeye]

"401(k)s and creates a new tax credit of up to $500 for companies that set up plans with automatic enrollment."

They ought to go look at the current laws as this change was put in many years ago.  It used to be you had to "opt in", now by law change you have
to "opt out"

[roony]

At my place of work we have to "opt in".

[deadeye]

roony,
They are probably in violation of the 2006 PPA, "Pension Protection Act"

The Pension Protection Act and 401(k)s
by Jack VanDerhei, Temple University and EBRI Fellow
When Congress enacted the Pension Protection Act of 2006 (PPA), its primary focus--as the title indicates -- was on defined benefit pension plans, the type funded entirely by employers. At the time, the federally guaranteed pension insurance fund was facing a deep and growing shortfall, and at least in part because of PPA, the projected shortfall has decreased.
Even though they are not in the title of the law, 401(k) plans also were significantly affected by PPA. In fact, the law opened the door for some of the most sweeping and beneficial changes in how 401(k)s operate -- both for the private-sector employers that sponsor these retirement plans and for the workers who participate in them.
The Automatics
For many 401(k) sponsors, the most important part of PPA, is the safe harbor status offered by the law, through what can be called "the automatics":
Automatic enrollment of workers in the plan, which sign up employees in the retirement plan by default and at a default savings contribution rate; they can opt out and can also elect a different contribution rate, but must take positive action to do so.
Default investments, which in many cases will be one of the new "qualified diversified investment alternatives," some of which automatically invest a worker's 401(k) contributions in an age-appropriate "life-cycle" diversified fund (greater equity exposure for younger participants, more fixed income for older participants).
Automatic escalation of workers' contributions to their 401(k) accounts on a periodic basis.

[roony]

From what I have read employers have the option of automatially enrolling employees in a 401k plan.
Nowhere have I read that they are required to do so.
According to the law an employer can opt for automatic enrollment. If he does, then the employee can opt out if the employee chooses to do so.