Obama announces steps to help Americans save for retirement
President Obama said Saturday that the Internal Revenue Service would start making it easier for companies to automatically enroll workers in retirement plans and that his administration would help people convert their tax refunds into savings.
In his weekly address, Obama said that the recession had threatened retirement security for millions of older Americans who have seen the values of their homes and 401(k) plans plummet.
“Half of America’s workforce doesn’t have access to a retirement plan at work, and fewer than 10% of those without workplace retirement plans have one of their own,” Obama said. “We cannot continue on this course.”
The president announced immediate changes in government practices and pledged to work to change the law so that companies would be required to automatically enroll workers in retirement savings plans.
The announcement came after a week of mixed economic signs: The unemployment rate rose to 9.7% in August from 9.4% in July. But the number of jobs lost was smaller than in previous months, and a separate report showed the first gains in the manufacturing sector in 18 months.
Obama called those signs “little comfort” to those suffering in this economic slump. He announced changes in IRS and Treasury Department practices to help ensure that people have the “opportunity and incentive to save -- for a home or college, for retirement or a rainy day.”
One change will streamline the process for automatic enrollment in 401(k) plans. In the past, employers usually sought IRS approval of changes in their plans to make sure they were complying with the law. Now the IRS will issue pre-approvals, enabling plan sponsors to adopt automatic enrollment plans quickly and to increase the rate of individual contributions without case-by-case approval by federal bureaucrats.
The government will give similar help to employers looking to enroll workers in simple individual retirement accounts, as long as the employees are free to opt out.
Another change will allow people who get tax refunds -- more than 100 million families, by one estimate -- to have the IRS deposit that money directly into a savings plan.
As soon as 2010, people will be able to buy U.S. savings bonds with their tax refunds by checking a box on their tax forms.
Employees will also be allowed to contribute their pay for unused vacation time after leaving a job into their 401(k) plans.
Obama said that down the road he would press Congress for legislation to enroll workers in IRAs through payroll deposit contributions at work if they don’t have workplace retirement plans.
Aides to the president said that the proposals were part of Obama’s long-term economic plan.
“His economic strategy centers around reviving the economy and rebuilding it,” said one senior administration official who asked not to be named because he wasn’t authorized to discuss the matter publicly.
In his address, Obama said he hoped to have a sunnier message to deliver this time next year.
He said that his “larger hope and expectation is that next Labor Day, the economic storms we’re weathering now will have given way to brighter and more prosperous times.”
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