The Automatic IRA Act of 2024 has been reintroduced by Representative Richard Neal, D-Mass., the ranking member of the House Ways and Means Committee. This measure requires companies with more than 10 workers to automatically enroll their workers in IRAs or other comparable automatic contribution plans, such as 401(k)s, if they do not currently offer a retirement plan. After adopting a plan, small firms may be eligible for the current startup tax credit or a recently proposed $500 tax credit for three years which is only applicable to automatic IRAs.
Exemptions for employers:
With 10 or less employees
Who are newly developed (Less than two years)
Who currently offers a retirement plan
With governmental or religious organization plans
“Building upon, expanding, and improving the private pension system in a manner that explicitly protects and complements employer-sponsored plans and arrangements" is how the bill summarized it.
It’s important to note this is a separate proposal from the Retirement Savings for Americans Act, which seeks to establish a new savings program, “The American Worker Retirement Plan” which would allow access to federally sponsored, portable, tax-advantaged savings accounts.
The summary presented contains information about the Automatic IRA Act, such as:
Contribution caps
Lifetime income requirements
Investments
Credits for small companies.
If the bill gets approved, it will take effect for plan years beginning after 2026 and apply the new small employer automatic IRA credit to tax years starting after 2024.
To navigate the changes proposed and ensure your organization is compliant for retirement planning, our Trusted Advisors are here to offer guidance tailored to your specific needs. Don't hesitate to reach out today and start preparing for a seamless transition towards a stronger retirement future for your employees.
Sources:
(2024, February 8). WHAT THEY’RE SAYING: NEAL’S AUTOMATIC IRA ACT OF 2024. Ways & Means Committee. https://democrats-waysandmeans.house.gov/media-center/press-releases/what-theyre-saying-neals-automatic-ira-act-2024
Sullivan, J. (2024, February 7). Federal Auto-IRA Bill for Uncovered Workers Introduced in the House. NAPA. https://www.napa-net.org/news-info/daily-news/federal-auto-ira-bill-uncovered-workers-introduced-house