Small business organizations are gearing up to oppose–or at least water down–the Obama Administration’s proposal to mandate enrollment for all workers in new bare-bones IRA programs–the so-called Automatic IRA.

The Wall Street Journal reported over the weekend that the National Federation of Independent Business and other small business groups are gearing up to fight the plan, which is contained in the administration’s budget and stems from the work of the non-partisan Retirement Security Project.

The aim of Automatic IRAs is to keep millions of Americans out of poverty in old age. It gets at one of the toughest challenges to retirement saving–the simple fact that half of the country’s working population doesn’t have access to a workplace retirement savings plan. Companies that are not willing to sponsor any retirement plan, have been in business for more than two years and have more than 10 employees would be mandated to offer a payroll-deduction saving option to their employees–no different from the way employers deduct for taxes. Employees would be enrolled automatically when they are hired, unless they chose to opt out.

According to the Journal, business groups are concerned about potential administrative headaches and legal liability:

One of the biggest problems, critics said, is that small businesses don’t normally do this kind of thing. A Gallup Organization poll three years ago of 754 small businesses found that only 26% of those surveyed offered their workers the option to deposit their paychecks directly into a checking or savings account.

Businesses are worried they could get sued if they mishandle individual retirement savings, said Todd McCracken, president of the National Small Business Association in Washington. “What happens if I ask you to put in 10% of my pay, and you put in 5% by mistake, and now the market’s gone up? Where’s my money? Are you going to be liable for that?”

The Retirement Security project originally was led by Peter Orszag, now President Obama’s budget director.

This entry was posted on Monday, March 9th, 2009 at 1:50 pm and is filed under Federal policy, Retirement Security. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.