President Barack Obama will be proposing new 401(k) and IRA rules in his 2017 budget. The US president has already introduced the myRA, a new type of retirement account. And, in his 2017 budget, he further plans to tweak the retirement account system. Here is a list of 5 ways Obama wants to change retirement accounts:
Obama proposing changes in retirement accounts!
1. Bigger tax breaks!
On setting up a new retirement plan, small businesses currently get tax credit. But, for small employers who are offering a new retirement plan; Obama wants to triple their existing credit to $1,500 per year for up to 3 years. And, even the small businesses that are going to add automatic enrollment to existing retirement plan; they will also get tax credit of $500 per year for up to 3 years.
2. Portable benefits!
As people change jobs, Obama’s budget is planning to propose funding the pilot programs which will make retirement benefits more portable. The nonprofit organizations and the states will gonna receive funding in order to design and evaluate the retirement benefits accommodating job changes, unpredictable work patterns, intermittent deposits and contributions from multiple employers.
3. Pooled 401(k) plans!
Under the current law, employers with a ‘common bond’ can form pooled 401(k) plans, and then can share the administrative work and the respective costs. But, president Obama is planning to propose removing the ‘common bond’ requirement so as to encourage more small employers to set up the pooled retirement accounts. The changed rule would also allow the nonprofits to create retirement accounts for self-employed individuals and contractors who are not eligible to participate in the existing workplace retirement plans.
4. Automatics IRAs!
Obama is planning to automatically enroll workers who are without a workplace retirement plan in an individual retirement account. This proposal would require employers having more than 10 workers to automatically enroll employees in an IRA (in case they don’t provide another type of retirement benefit). And, the companies with 100 or fewer employees who have automatic IRA system will also receive up to $3000 as a tax credit.
5. Part-time participation!
Employers are currently allowed to exclude their part-time employees from participating in the company’s retirement plan. But, Obama is proposing that all employees working for at least 500 hours per year for a period of three or more years, to be eligible for participating in an employer’s existing retirement plan.
With this change, president Obama is planning to provide a million people with access to retirement plans.