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Hot trends in retirement plans

Automatic IRAs

Many of the 78 million Americans who don't have access to workplace retirement plans today may soon find themselves enrolled in an automatic Individual Retirement Account.

The proposal from the Obama administration, which has been introduced before but not yet implemented, would require small employers with more than 10 employees that do not currently offer a retirement plan to automatically enroll their employees into an IRA.

Workers would have a portion of every paycheck withheld and directly deposited into their IRA -- unless they opt out.

Employers would not be required to make matching contributions to the accounts.

Automatic IRA deposits would qualify for the saver's tax credit, which provides a government match for workers' contributions to retirement savings plans.

Under the White House's latest proposal, revealed in the annual report on the Middle Class Task Force, the saver's tax credit would be simplified and expanded.

The expanded credit would match 50 percent of the first $1,000 of contributions ($500 for individuals) to retirement plans by families earning up to $65,000, and provide a partial credit to families earning up to $85,000, rendering more middle-class families eligible.

The proposal also would make the credit fully refundable, allowing lower-income savers to take advantage of the credit for the first time.

"The question is whether the administration will have the time to focus on (automatic IRAs) and make it happen," says Adams, who believes "this may not be the right year to do that."

If the proposal does get the green light, he notes, it likely won't be implemented before 2012.

Enhanced saving features

The White House also proposed making it easier for workers to save their federal tax refunds by allowing them to receive it in the form of a savings bond that can be deposited into their IRAs or bank accounts.

It announced a proposal to allow workers to put payments for unused vacation time and sick days into their retirement plans as well, an option not currently available to most workers.

401(k) fee disclosure

Another hot item on the legislative agenda is 401(k) fee disclosure.

At present, employees are given precious little information about the fees and expenses associated with their retirement plans. Fees make a big impact on overall investment returns.

After countless failed attempts to implement reform, a bill that would increase the transparency of 401(k) fees for employees is widely expected to pass by the end of the year, says Wray.

But guidance from the Labor Department on how employers should provide that information to plan participants could come sooner than that -- as early as this spring.

The White House recently announced its commitment to making the 401(k) system more reliable and transparent, and to give American workers and plan sponsors the information they need to get "investment, record-keeping and other services at a fair price."


Investment advice

One reason participation in employer-sponsored 401(k) plans remains low is that retirement savers can't make sense of their investment options and aren't willing to track down (or pay for) a financial adviser for help.

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