Obama plan would ensure companies establish employee IRA accounts
by Efin Advisor | March 10, 2009
Financial insurance for retirement can take many forms. Whole or Universal Life insurance policies and annuities can build actual cash value for those golden years. It’s a good thing, too. Most small business workers have employer-sponsored retirement options that range from slim to none.
Under the proposed federal budget plan from the new Obama administration, employers that don’t offer a retirement plan would be required to enroll their workers in a direct-deposit IRA account.
This requirement is one step in Obama’s goal of creating a system of automatic workplace pensions apart from Social Security. Employees at businesses that do offer retirement plans would be automatically enrolled in them, with the ability to opt out if they choose. The automatic enrollment feature would significantly increase the number of low- and moderate-income workers who save for retirement, according to the Obama administration.
About 75 million workers – most of them working for small businesses – lack access to an employer-based retirement plan.
Under the Obama proposal, small businesses that don’t offer retirement plans would not be required to contribute money to their workers’ IRAs, but they would have to set them up and link them to their payroll systems. Opponents claim that will cost some money and pose an additional burden for small businesses. Your future is on the line.
I see several flaws with this plan. First, there is a massive gap- by excluding small businesses you allow for people to monkey with the definition of the term and poke massive holes in the solvency of this policy. Second there is the fundamental problem of requiring businesses to do anything. For each business there may be a different solution that employees prefer, or that helps the business prosper. When the government steps in like this it erodes all independent action and eliminates what makes our country so great.
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This is a fantastic idea. Imagine if businesses actually had to provide for their employees! It sure would have been nice to have a policy like this in place before. This will make job portability much easier for many people, and will adapt our job market to the ever changing economy.
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