A bipartisan bill introduced in the House and Senate in April is designed to provide you with another way to save for retirement. Called the Automatic IRA Act of 2007, the bill would link automatic payroll deductions to Individual Retirement Arrangements.
Though the new bill is not yet law, here’s a brief overview of what’s being proposed:
- If the firm you work for has ten or more employees and does not currently have a retirement or pension plan, your employer will be required to offer you the opportunity to enroll in an IRA. The bill also proposes a new, simplified type of plan—the Automatic IRA.
- Your account will be funded with money deducted from your paycheck. Your employer would not be permitted to make contributions.
- Participation in the plan will be voluntary, and you’ll be able to opt out if you change your mind.
- Your payroll-deduction IRA will be treated the same as a traditional or Roth IRA under current tax law.
- Small businesses with fewer than one hundred employees would receive a tax credit to offset costs of establishing the payroll deduction plan.