Retirement finance experts believe that Congress will reintroduce and pass in 2010 two bills–S. 1141 and H.R. 2167–that would require small- and medium-sized businesses to automatically enroll their employees into an IRA. The Senate bill, sponsored by Senator Jeff Bingaman (D-New Mexico), and the House bill, sponsored by Rep. Rich Neal (D-Massachusetts), are both called the Automatic IRA Act of 2007.
The proposed bills would extend retirement coverage to many who don't currently have any, but the logistics of putting a plan in place, not to mention the cost of so doing to small- and medium-sized businesses, has sent a frisson throughout that community, which according to Mark Gutrich, president of Denver -based ePlan Services, has been grossly underserved by the retirement finance industry.
Initiatives for the auto IRA first came to the fore in 2007, and have been in discussion since then. If the bills become law, employers at any company that is at least two years old and has 10 or more employees would be allowed to take a small amount from employee paychecks and deposit it into an IRA. Employers would select investments but employees would have the right to change mutual funds, or decide to pocket all their pay and skip saving altogether. The auto-IRA debate has been overshadowed by the frenzy surrounding healthcare reform, Gutrich says, but it will likely come back into the spotlight soon.
"Almost all the large players in the industry–the Fidelitys, Vanguards, and so on–are focused on large corporate accounts with bigger assets," Gutrich says. "With the new [proposed legislation], we're talking about 60 million potential new IRAs, which is huge and dwarfs the number of IRAs currently out there, but we're also talking about very small balances that don't necessarily interest the larger companies."
Catering toward the needs of the small business universe requires a dedicated effort, Gutrich says, and the ability to be able to structure, implement, and administer a retirement plan at an affordable price point, leveraging technology to do so. There are very few firms in the retirement finance industry that have the capacity to do this for small businesses, he says, but ePlan Services has been focused on bringing 401(k) plans to this niche since its inception 10 years ago, so "we can easily flip a switch and do auto-IRAs when we need to," he says.
