Legislative Report

Obama Budget Proposals Include Enhanced Saver’s Credit, Auto IRA

The Obama Administration is proposing changes in the Saver's Credit and provisions to require employers to offer an automatic IRA. Both are contained in the Administration's proposed 2010 budget.

The Saver's Credit changes are aimed at expanding the number of moderate and lower income individuals who use the program to boost their retirement savings. As the program now operates, individuals within certain income limits get a tax credit based on the voluntary contribution they make to a qualified retirement plans such as 401(k) and 457 plans or an IRA. The credit rate varies according to the taxpayer's adjusted gross income.

Currently, the Saver's Credit is "nonrefundable," meaning it only offsets a taxpayer's income tax liability -- to get the credit, an individual must pay income taxes. Making the credit "refundable" would in effect turn it into a matching contribution that would be automatically deposited into a qualified retirement plan account or IRA to which the individual had contributed. The individual would not have to pay income taxes in order to receive the credit.

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The Washington Perspective is a periodic online newsletter highlighting legislative and regulatory proposals affecting public sector retirement plans.

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• DOL, SEC Hearing Considers Further Target Date Oversight, but Show Little Interest in More Regulations
  Securities and Exchange Commission (SEC) Chair Mary Shapiro and a series of mutual fund industry representatives were among those considering changes in how target date funds are structured and marketed in a Joint Hearing on Target Date Funds held June 18 at the Department of Labor (DOL).
• Rep. Pomeroy Introduces Bill to Boost Annuity Tax Breaks
  Rep. Earl Pomeroy (D-ND) and Rep. Ginny Brown-Waite (R-FL) have introduced the Retirement Security Needs Lifetime Pay Act (H.R. 2748). Similar to legislation introduced by Pomeroy in the 110th Congress, the bill contains several provisions to encourage retirees to create annuities as part of their retirement savings plans.
• Rep. Neal Reintroduces Fee Bill with a Number of Modifications
  Rep. Richard Neal (D-MA), Chairman of the House Ways & Means Subcommittee on Select Revenue Measures, has reintroduced his Defined Contribution Plan Fee Transparency Act. The newest bill comes after Neal introduced the original bill (H.R. 3765) in the 110th Congress.