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Expanding Retirement Plans?
In response to today’s news about President Obama’s expansion of retirement plans, our partner, Greg Welborn wrote an immediate response on how this political and economic change will affect you and your family.
They seem great on the surface – after all, who could be opposed to encouraging more people to save for retirement – but when you look below the surface, they’re liable to do more harm than good.
Offering tax credits to small businesses that automatically enroll their employees will give the businesses tax reduction, but employees can immediately opt out. Auto enrollment has been around a long time. Employees who want to save for their retirement will do so. Those who don’t will simply opt out. The net effect is liable to just reduce federal tax receipts.
Requiring companies with existing plans to offer them to part time workers who work 500 hours will simply encourage companies to terminate their plans. This will hurt the existing employees who are taking advantage of the retirement plan. There’s usually a reason that the employer doesn’t offer the plan to part timers. If you make them include people who they didn’t want to, and the cost is too high, they’ll simply cancel the plan. Everyone loses.
Making it easier to pool retirement plans to reduce expenses. The amount of savings would be relatively insignificant. Retirement plans are already ridiculously inexpensive if you want to offer a basic plan. “Expense” shouldn’t be a reason that a plan is not available. Will some plans save money? I suppose so, but if the goal is to get more people covered, or to get employers to contribute more money by reducing administrative costs, this proposal won’t move the needle.
Read USA TODAY article here