NEW YORK (TheStreet) -- Saving for retirement could soon become easier for millions of Americans.
Federal and state governments are working on new rules that would automatically deduct more of each employee's paycheck for their 401(k) plan and automatically increase that amount over time.
The aim is to help the 58% of Americans who don’t contribute to a 401(k) plan, as well as the 60% who don't have enough money in their savings accounts to live on for six months or more, according to Fifth Third Bank.
The SAFE Retirement Act introduced by Sen. Orrin Hatch (R-Utah), as well as the Retirement Security Act sponsored by Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.) include measures to encourage and expand auto-enrollment and auto-increase. Currently, any employer can offer automatic enrollment, but not all do and and not all employees who are eligible participate.
"Their impact today is somewhat limited because of thresholds established by current law," said Cathy Weatherford, president and CEO of Insured Retirement Institute (IRI). "These bills seek to address that issue by effectively increasing these limits.”
Current law permits auto-enrollment beginning at a 3% of annual salary and caps automatic increases at 10% of pay. The bill introduced by Nelson and Collins would start automatic deferrals at 6% of salary, while Hatch’s bill would do the same, as well as eliminate the 10% cap on automatic increases.
"Presently the majority of private-sector employers using automatic enrollment set the default rate at 3% of pay, the starting point for the current auto-enrollment safe harbor," said Weatherford. "This is too low for adequate retirement savings."