Compliance May 4, 2007

Legislation Targets Employers Without Retirement Plans

May 4, 2007 (PLANSPONSOR.com) - Employers without retirement plans would be required to establish an automatic payroll deduction program to an individual retirement account (IRA) under new legislation.
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Specifically, employers with more than 10 employees that do not offer qualified retirement or pension plans would be required to allow all eligible workers the option to put a portion of their wages into an automatic IRA account through payroll deductions under the Automatic IRA Act of 2007 (H.R. 2167).  

Co-sponsored by Congressmen Phil English (R-Pennsylvania) and Richard Neal (D-Massachusetts), the legislation is designed to make it easier for workers to save for retirement by requiring employers to establish an automatic payroll deduction to an IRA, according to a press release.

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Under the bill, employers would be able to choose the type of IRA option for their employees.   They could:

  • establish accounts for all employees at one institution;
  • allow the employee to establish their own account; or
  • opt to use the safety-net option: a private-sector provided contracted by the federal government’s Thrift Savings Plan (TSP II) Board (if the employer does not want use a regular, private provider IRA)

Tax Credit Offsets

To offset the administrative costs associated with establishing the payroll deduction, small businesses with less than 100 employees would receive a tax credit of up to $250 for the first two years of the program.   However, any employer that fails to comply with the new regulations would be subject to an excise tax of $100 per eligible employee.    

The Automatic IRA Act would not require employers to offer the retirement plan to union-represented employees, nonresident aliens, employees under the age or 18 or workers that have been on payroll for less than three months.   All eligible workers would have the option to opt-out of the savings program.

A companion bill (also named  Automatic IRA Act of 2007 ) was introduced last month in the Senate by Senators Jeff Bingaman (D-New Mexico) and Gordon Smith (R-Oregon).

Administration May 3, 2007

Montana Governor Meets Over Union Pension Investments

March 29, 2005 (PLANSPONSOR.com) - The administration of Montana Governor Brian Schweitzer and a major national labor union are discussing investments by the union's pension funds in the state's economic development projects.
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The new effort is also designed to help create construction jobs with union benefits, according to a news report in the Billings (Montana) Gazette.

According to the newspaper, Evan Barrett, the governor’s chief business officer, met with Schweitzer, Terry O’Sullivan, general president of the Laborers’ International Union of North America and the Union Labor Life Insurance Co., and others.

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Barrett said the primary mission of the meeting was to have the union and public pension fund leaders understand what the state can do with economic development and investment. Participants also wanted state officials to get a better understanding of the limitations and possibilities of using union pension funds.

“Frankly, by the end of the day, we see some possibilities that could make this work and might bring new investment into Montana from these pension funds and union insurance companies,” Barrett told the newspaper. “The possibilities range from public-oriented infrastructure that supports other developments such as an industrial park, a building that would house multiple companies that might provide jobs to housing, commercial and potential industrial projects.”

Barrett said the state expects to eventually broaden the effort to include other pension funds as well. “This is a foot in the door that if the processes work right opens a much larger universe,” he said.

According to O’Sullivan, his union has a $2.2 billion fund called J for Jobs. He said there are five national entities with similar programs with assets totaling $12 billion. Some money in these funds is unencumbered and could be invested in construction projects, he said.

“We fund infrastructure building projects,” O’Sullivan said, according to the news report.   “We’ve never done it in consultation with the economic development plan of a governor.”

Barrett and Randy Siemers, a Laborers official in Montana, set up the meeting. The Laborers’ Union has 1,700 to 1,800 Montana members.

“We have brought some new players to the table, and I think the prognosis is pretty good we can make something productive out of it,” Barrett said. “I would hope in a reasonable amount of time we might do a deal and a template to try out the process to see if it can work.”

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