President Obama’s Budget Includes Automatic IRA Proposal and Expansion of Saver’s Credit for 401(K) IRA Savings

Contact: Jennifer Devlin, Retirement Security Project, 703.876.1714


Washington, DC - 02/26/2009 - The Administration’s budget outline, released today, includes the Automatic IRA proposal developed by the Retirement Security Project. The proposal, endorsed by President Obama and Senator McCain during the Presidential election campaign, would pursue universal retirement savings coverage by allowing employees not covered by qualified retirement plans to save for retirement through automatic payroll deposit IRAs. 

In addition, the Administration’s budget proposes to expand the Saver’s Credit—as proposed by the Retirement Security Project—to increase incentives for moderate- and lower- income workers to save in 401(k)s and IRAs.

“The President’s 2010 Budget lays the groundwork for the future establishment of a system of automatic workplace pensions, on top of and clearly outside Social Security, that is expected to dramatically increase both the number of Americans who save for retirement and the overall amount of personal savings for individuals,” according to the Budget Outline.  “Under this proposal, employees will be automatically enrolled in workplace pension plans—and will be allowed to opt out if they choose. Employers who do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit IRA account that is compatible with existing direct-deposit payroll systems. The result will be that workers will be automatically enrolled in some form of savings vehicle when they go to work—making it easy for them to save while also allowing them to opt out if their family or individual circumstances make it particularly difficult or unwise to save. Experts estimate that this program will dramatically increase the savings participation rate for low and middle-income workers to around 80 percent.”

Nearly half of American workers – an estimated 78 million – currently have no employer-sponsored retirement savings plan.  Co-authored by Retirement Security Project principals Mark Iwry and David John, the Automatic IRA proposal would extend payroll-based saving opportunities to those not currently covered by any plan. 

The Saver’s Credit helps moderate- and lower-income families who save in 401(k)s or IRAs. 

The administration’s budget, “proposes to expand retirement savings incentives for working families by modifying the existing Saver’s Credit to provide a 50-percent match on the first $1,000 of retirement savings for families that earn less than $65,000. The credit would be fully refundable to ensure that savings incentives are fair to all workers.”

The Automatic IRA proposal was introduced in the 110th Congress as the "Automatic IRA Act of 2007", H.R. 2167, sponsored by Rep. Richard Neal (D-MA) and Rep. Phil English (R-PA), and S. 1141, sponsored by Senators Jeff Bingaman (D-NM) and Gordon Smith (R-OR), with additional cosponsors in the House and Senate.   

About the Retirement Security Project

The Retirement Security Project is supported by The Pew Charitable Trusts in partnership with Georgetown University’s Public Policy Institute and the Brookings Institution. It is directed by William Gale, also Vice President and Director of Economic Studies and Co-Director of the Tax Policy Center at The Brookings Institution; with Principals, Mark Iwry, Non-Resident Senior Fellow at the Brookings Institution and David C. John, Senior Research Fellow at the Heritage Foundation.

Pew is no longer active in this line of work, but for more information visit the Retirement Security Project on PewHealth.org.

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