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Legislative Highlight – Automatic IRA Act of 2024

In February 2024, the Ways and Means Committee Ranking Member Richard Neal (D-Mass.) introduced the Automatic Individual Retirement Account (IRA) Act of 2024. The proposed bill would significantly expand retirement coverage for American workers specifically targeting gig workers and independent contractors.

The proposed bill would generally require employers with more than 10 employees that do not currently sponsor a retirement plan to automatically enroll their employees into automatic IRAs or other automatic contribution plans. Smaller employers would benefit from this bill since these automatic IRAs would be eligible for the existing startup tax credit or the proposed $500 3-year automatic IRA tax credit.

Automatic IRA Plan Design
These automatic IRAs would be set up as payroll deduction IRAs. The IRA can be either a traditional IRA or Roth IRA but if no choice is made the default would be a Roth IRA. Employers would contribute a default percentage of an employee’s paycheck into the IRA. Employees will have the ability to increase or decrease the deferral percentage as well as opt out entirely. The default contribution rate would be set at 6% and increase 1% percent every year until it reaches 10%.

Investment Selection
The automatic IRAs must offer employees a target date fund series, which will serve as the Qualified Default Investment Alternative (QDIA), a capital preservation fund and a balanced fund. Regarding other automatic contribution plans and state-based auto IRAs, current law applies with respect to investments.

Effective Date
The proposed legislation would apply to plan years beginning after 2026.  The new credit for small employer automatic IRAs would apply to tax years beginning after 2024. This bill would build on the success of the 15 auto-IRA state plans that are already in place. If you have any questions regarding this proposed legislation, please contact your local Spectrum representative.

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ERISA Workplace Retirement Plan Limits

The federal government annually publishes updated qualified retirement plan limits, which impact the contributions, benefit accruals, and compliance of ERISA covered qualified retirement plans. The below tables summarize the most significant changes in recent history.


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