White House Works to Improve Retirement Savings Portability
President Obama is bringing attention to an area of much concern to many Americans today: retirement savings. At the end of January, the White House announced it would be rolling out a plan to try and improve the portability of retirement savings for many Americans who change jobs frequently. More details were then outlined in the 2017 Fiscal Year Budget, released on February 9, 2016.
In the evolving landscape of today’s work environment, retirement savings plans have seen some dramatic changes. According to the White House’s information, “The number of traditional defined benefit pension plans in the private sector has fallen from 103,000 in 1975 to 44,000 in 2012, and the number of active participants in such plans has fallen from 27 million to 16 million.”
Because of these changes, many Americans are being left behind and will not end up being prepared for retirement. According to the White House, one-third of working Americans do not have access to a retirement savings plan through their employer. Research shows that if Americans do not have a retirement plan through work, they are unlikely to save on their own. In fact, the White House says only about 10% of people without a workplace retirement plan will contribute to their own retirement savings plan. One of the other large issues according the a statement from the White House is that for citizens, “Their careers may be mobile, but too often their retirement accounts and savings are not.”
How does the government plan to offer more Americans help with planning for retirement savings?
- Automatically enroll Americans without access to a workplace retirement plan in an IRA
- Provide tax credits for auto-IRA adoption, and for businesses that choose to offer more generous employer plans or switch to auto-enrollment
- Expand Retirement savings options for long-term, part-time workers
- Encourage state-based retirement savings initiatives
- Increase Coverage by Supporting New, More Flexible Benefit Models
Each of these points is outlined in more detail in the 2017 Fiscal Year Budget from the White House.
Specifically, “President Obama is proposing a new program that will provide grants to States and nonprofits to test innovative, more portable approaches to providing retirement and other employment-based benefits. The goal is to encourage development of new models that are portable across employers and can accommodate contributions from multiple employers for an individual worker or independent contractor, as well as contributions from individuals whose work patterns don’t provide reliable amounts of income each month,” said a statement from the White House.
The new plans are expected to give nearly 30 million Americans access to a retirement savings opportunity.