Jeff Bingaman United States Senator from New Mexico

WASHINGTON – U.S. Senator Jeff Bingaman has introduced the Automatic IRA Act of 2010, which takes a common-sense approach to addressing the nation's retirement savings crisis.  When fully phased in, the bill will give nearly 42 million Americans an easy, effective way to take responsibility for their fiscal futures and plan for a secure retirement.

Senator John Kerry is a cosponsor.

According to a 2009 Boston College Center for Retirement Research report, nearly 50 percent of American households will retire without enough savings to maintain their pre-retirement standard of living.  A significant driver of America's inadequate retirement savings is a crisis of coverage.  About half of all American workers now have no opportunity to save for retirement at work; in New Mexico that percentage reaches nearly 60 percent.

Bingaman's Automatic IRA Act of 2010 (S. 3760) enables nearly all employees who work for a private business with more than 10 workers and whose employer does not already offer a retirement plan to contribute to retirement savings through payroll deductions.  Worker contributions would be deposited into their own Individual Retirement Account (IRA), ultimately managed by the same banks, mutual funds, insurance carriers, and other institutions that currently provide IRAs. The approach builds on the use of automatic features in 401(k) plans that encourage employees toward sensible decisions (while allowing them to make alternative choices), which has proven highly successful in raising 401(k) contribution rates.

Employers will receive a tax credit to cover the administrative costs of setting up the IRA account, but they will not be allowed to make a contribution to it.

"Last year, only half of all American workers had access to any type of retirement plan or account at work.  As a result, millions of Americans enter their retirement years with inadequate savings," Bingaman said.  "Our bill will open the door to a secure retirement for nearly 42 million workers, including 250,000 New Mexicans. Giving workers a way to directly deposit some of their paycheck into a retirement account will help millions of Americans better prepare for their golden years."

"This legislation simply makes it easier for Americans to save for retirement without making businesses shoulder new burdens.  More than 800,000 workers in Massachusetts would be eligible to participate in a payroll deduction IRA and carve a path to a secure retirement," Kerry said.

The Obama administration has called on Congress to enact an automatic IRA measure, and included a proposal in its FY 2011 budget.

"I applaud Senator Bingaman for introducing his Auto IRA bill, and I urge the Congress to help increase the retirement security of working Americans by creating automatic IRAs," said Vice President Joe Biden.  "Right now in America, nearly 80 million workers have no employer-based retirement plan, making it hard to save enough for the secure and dignified retirement they deserve.  Automatic IRAs, which were  proposed in the President's budget and  supported by the Middle Class Task Force that I chair, would help improve the retirement security of tens of millions of Americans by making it easy for employees to save through payroll deposit.  Contributions would be purely voluntary; employees would be free to opt out at any time.  The legislation also provides exemptions, simplified procedures and a tax credit to make implementation easy for small employers.  Creating automatic IRAs is a common-sense proposal that has received bipartisan support in the past, and I congratulate Senator Bingaman for his leadership in this matter."

The concept of automatic IRAs was first developed several years ago by scholars at the Heritage Foundation and Brookings Institution. The idea enjoys the support of experts such as Martin Feldstein and Jane Bryant Quinn.

Enactment of automatic IRA legislation is also supported by a broad range of organizations, including AARP, Consumers Union, the Minority Business Roundtable, and the U.S. Women's Chamber of Commerce.

Bingaman is a member of the Senate Finance Committee.  "A strong path to retirement is essential for America's middle class families, and for that reason I will work with my colleagues to see that this bill is enacted as part of the extension of the middle-class tax cuts," said Bingaman.

S. 3760 and a summary of the bill are available on Bingaman's website.