This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

'Automatic' IRAs to Fill Retirement Gap

BOSTON ( TheStreet) -- The "automatic" IRA may be on the way.

A bill filed by U.S. senators Jeff Bingaman (D-New Mexico) and John Kerry (D-Mass.) would automatically enroll most U.S. workers in individual retirement accounts if their employers don't sponsor a retirement plan. Half of American workers have no work-based retirement plan, and as many as 42 million Americans would benefit from the bill, Bingaman said in a statement.

The sponsors make their case, in part, by citing the increase in contribution rates commonly credited to automatic enrollment features now used with many 401(k) plans. Automatic IRAs would result in new contributions of about $15 billion a year, the sponsors say.

In the first year after enactment, the provision would apply only to firms with 100 or more employees; in the second year, 50 or more; in the third, 25 or more; and in the fourth, 10 or more. Workers at least 18 years old and employed for at least three months would be automatically enrolled in an IRA.

Businesses would contribute a default percentage of an employee's paycheck into an automatic IRA account. The bill sets the default at 3%, and employees could raise or lower the contribution, or opt-out.

To offset administrative costs, companies would receive a $250 tax credit for each of the first two years of their automatic IRA offering. Employers that don't offer a plan would be subject to an excise tax of $100 for each employee who was supposed to be covered.

To assist employers with selecting an IRA provider, a Web site developed by U.S. Treasury would list those that meet regulatory requirements. Employers would allow staff to select their own IRA provider.

All automatic IRAs would offer the same three standardized investment options, each to be developed with regulations and fee guidelines issued by the Treasury and Department of Labor. The options would include a "principal preservation fund" (which would include a special Treasury Retirement Bond , the R-Bond, designed for use within an automatic IRA), a "life-cycle" option and an "alternative investment option" that can include a higher concentration of equities.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs