Automatic IRA Act of 2024 – Video Episode 372
Key Take-aways:
1. The “Automatic IRA Act of 2024” requires employers with ten or more employees to set up automatic retirement contribution plans for all full-time and “long-term part-time” employees, with auto-enrollment.
2. Employers will receive a $500 tax credit for up to three years when they establish these new plans.
3. The legislation aims to create $7 trillion in additional retirement savings and 62 million new retirement savers over the next decade, according to projections.
4. The bill includes a provision for employees with a vested balance of $200,000 or more in their plan to automatically purchase an annuity, reflecting the insurance industry’s finding that 70% of workers aged 40-45 are likely to allocate retirement assets to an annuity.
Automatic IRA Act of 2024 – Video Episode 372 – Links
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Subscribe to the Mullooly Asset YouTube Channel
Link to SHRM regarding Automatic IRA
House Ways & Means Committee Introducing the Automatic IRA Act of 2024
Automatic IRA Act of 2024 – Video Episode 372 – Transcript
I don’t usually like reading from notes when I’m doing these videos.
But I’m going to have to – because we have some silly legislation coming through from Congress.
So stick around for that.
Congress has put a bill to the floor called the “Automatic IRA Act of 2024.” Why do they waste time coming up with this kind of stuff?
It’s a new bill that’s going to require employers – with ten employees or more – to be forced to open up automatic IRA retirement contribution plans. For all full-time and “long-term part-time” employees. They’re going have to auto-enroll everybody. Yes.
The employers will get a $500 tax credit – for up to three years – for this new plan.
The reason why they’re doing this – it’s sponsored by Congressman Richard Neal from Massachusetts – showed that, $7 trillion in additional retirement savings COULD be created using a plan like this Automatic IRA Act.
And sixty-two million new retirement “savers” COULD be created over the next ten years with the Automatic IRA Act.
I’m always skeptical when they make projections like that.
But it would also require employers that have employees in these plans — well, the plans that are are to come in the future — if they’ve got a vested balance of $200,000 or more — they can automatically get an annuity!
I knew there had to be a twist to this!
“70% of workers” according to an insurance industry survey … seventy percent of workers aged 40 – 45 said they were likely to allocate a portion of their retirement asset to an annuity. What a shock.
So it starts with – according to this bill – the way it’s structured in the first year, you have to set it up so your employees get automatically enrolled and 6% of their compensation goes in to a workplace IRA… the automatic IRA.
The second year becomes 7%. Then 8%, then 9%, and up to 10% per year.
Honestly, it sounds good in theory. II just don’t know if this is realistically going work.
If you want to really help your employees, employers – if you’re out there – just pay your employees more money.
Just give them more money. And stress to them they need to have some kind of emergency fund or savings account before they’re putting money away for retirement.
Most people can’t afford a $400 car repair today.
Putting money away for retirement sounds very noble. It’s a grand gesture. But we really have to see employees get their finances straight.
It starts with an emergency fund.
That is going to be the message — a little downbeat — for episode 372.
