Introduced by US Senator Jeff Bingaman (D-New Mexico) the legislation supports and encourages defined contribution plans thatinclude both automatic enrollment and an automatic increase in aparticipant’s savings rate, unless the participant elects otherwise. According to the PSCA, such plans – when combined with a default investment that is appropriate – can and have demonstrated their ability to increase savings meant for retirement. This effect is seen most strikingly in low- and middle-class households.
Under the bill, employers will be encouraged to automatically increase their employees’ contribution annually by 1%, according to a press release from Bingaman. Employers who offer these features will be deemed to have a “non-discriminatory” plan, the release stated, provided that they quickly vest the employers’ contributions and match savings at least 50% for the first 7% of the employee’s contribution.
The bill is being referred to the Senate Finance Committee, which Bingaman sits on.
“Senator Bingaman is a recognized leader on retirement issues on boththe Finance and Health, Education, Labor and Pensions committees,”remarked PSCA President David L. Wray, in a Web statement. “The legislation containsimportant PSCA – supported provisions that provide fiduciary protectionsand clarifications for automatic enrollment, automatic contributionincreases, and default investments appropriate for accumulating retirement savings. We look forward to working on other issues that webelieve will improve the bill so that even more companies will use thisnew plan design.”
A similar bill has been introduced in the House, with Rep.Rahm Emanuel (D-Illinois) attempting to make it so automatic enrollment is not inhibited by state laws (See 401(k) Automatic Enrollment Support Bill Introduced in Congress ).