CFED
Stay Informed!
The Inclusive Economy
Automatic IRAs: A Letter to the Editor
By Sean Luechtefeld on 07/23/2010 @ 04:12 PM
This morning I came across a letter to the editor, penned by David C. John, Senior Research Fellow at the Heritage Foundation, which is written in response to an article in The Hill which argues that Automatic IRA legislation has narrow bipartisan support and would be a bane to employees and small business owners. As John argues in his letter (the full text of which I’ve shared below), automatic IRA enrollment is beneficial to low-income Americans who might otherwise lack a simple and low-cost way to save for retirement. I think this debate is fascinating, represents an issue important to CFED’s mission and deserves more attention as we work to find innovative ways to provide low-cost saving tools – let me know if you agree.
To the Editor:
Your July 13 article on the Automatic IRA (“Democrats and AARP want to make IRA enrollment automatic”) left out several crucial parts of the story.
First and foremost, the Automatic IRA has had wide bipartisan and cross-ideological support since it was first unveiled at The Heritage Foundation in February 2006. This is not some partisan initiative as implied in your story. It was developed by Mark Iwry, who was then at Brookings, and I as partners in the Retirement Security Project. In the election of 2008, the Automatic IRA was endorsed by both the McCain and Obama campaigns. This broad support continues, and the Heritage Foundation’s most recent article in favor of the Automatic IRA was published in February of this year.
The Automatic IRA is designed to provide a simple, low cost way for American workers who don’t have access to a 401(k)-type plan to save for retirement. By combining the automatic enrollment technique that has been adopted by most larger 401(k) plans with the IRA that workers have known for decades, we hope to enable new savers to build retirement security while giving older savers who may have had a 401(k) at another employer the ability to continue to increase their savings.
Studies show that small business employees want the Automatic IRA, and as they learn more about the proposal, employers do also. In past congresses, the proposal had bipartisan co-sponsorship. While the current political climate makes that more difficult, such support is possible this year also. In addition to AARP’s support, the Automatic IRA has also been endorsed by a number of small business groups including the US Women’s Chamber of Commerce, the National Alliance of African-American Chambers of Commerce, Women Impacting Public Policy (WIPP) and the Business and Professional Women’s Foundation.
In short, the Automatic IRA is not part of a narrow partisan agenda as your article implied. Rather, it is a broad based cross-ideological effort to improve American’s retirement security.
Regards,
David C. John
Senior Research Fellow
The Heritage Foundation
214 Massachusetts Av., NE
Washington, DC 20002
202.608.6229
Frankly, I think Mr. John makes a compelling case for automatic IRA enrollment. The initiative doesn’t force new employees to maintain their enrollment – opt-out is possible at any time. Furthermore, policymakers on both sides of the aisle have voiced support for Automatic IRA, especially as the Obama Administration has placed legislative emphasis on ensuring Americans are able to save in this tough economic climate. To me, it seems that Automatic IRA is a simple yet effective way to promote saving for retirement via a mechanism that even the Hill article recognizes has proven strong. In other words, such an effective savings tool advances CFED's mission of expanding economic opportunity - a win-win for all of us.
What do you think? Post your opinion or pose your own question using the comments section below.
Copyright © 2012 CFED – Corporation for Enterprise Development 
1200 G Street, NW Suite 400 Washington, DC 20005 202.408.9788
Powered by ARCOS | Design by Plus Three
Comments
Leave a Comment