House Subcommittee Hearing Considers Changes in IRA Incentives

July 11, 2008

The House Ways and Means Subcommittee on Select Revenue Measures held a hearing in June to consider changes to existing Individual Retirement Arrangements (IRAs) that are proposed in two House bills.

H.R. 5160, The Small Business Add Value for Employees Act (SAVE) of 2008, sponsored by Rep. Richard Neal (D-MA) and Rep. Phil English (R-PA) would make payroll deduction IRA enrollment mandatory for employees.

Rep. Ron Kind (D-WI) and Rep. Kenny Hulshof (R-MO) are sponsors of a second bill, H.R. 2167, The Automatic IRA Act of 2007. It would make IRA enrollment discretionary.

The proposed Neal and English legislation drew support from a number of committee members as well as from the American Association of Retired Persons (AARP) and the Retirement Security Project. It drew opposition from the Department of Labor (DOL) and the Treasury Department.

The DOL and Treasury instead support the Kind/Hulshof legislation. One important concern voiced by a number of speakers is that any expansion of incentives to increase IRA participation could undermine employer incentives to adopt and maintain qualified retirement plans.

Brad Campbell, representing DOL at the hearings, said his agency would oppose any Congressional efforts to give DOL responsibility for regulation of payroll deduction IRAs. Tom Reeder, representing the Treasury, said mandating payroll deductions would deter smaller employers from offering other benefit plans, such as health coverage.

No further hearings have been announced, but changes to IRA plans are all but certain to be included in larger tax debates that will come with a new Administration and the next Congress.