You can access the testimony presented at the Ways and Means Committee Hearing on Individual Retirement Accounts (IRAs) and their role in our retirement system here. The focus of the hearing was a recently issued GAO Report: Individual Retirement Accounts, Government Actions Could Encourage More Employers to Offer IRAs to Employees. If you want to read a good summary about the current law relating to IRAs as well as about all of the state and federal proposals to expand the IRA concept, read the Joint Committee of Taxation’s Report entitled, “Present Law and Analysis Relating to Individual Retirement Arrangements,” which was released in connection with the hearing.
The bottom-line, of course, is that people generally aren’t saving enough, small employers are not offering retirement plan vehicles for their employees, and Congress is looking at ways to encourage savings. It is no surprise that the GAO Report indicates IRAs are being used primarily as a “parking spot” for individual rollovers from employer-sponsored retirement plans, rather than as a savings vehicle. However, mandating that small employers must offer some type of automatic IRA program, as discussed in the hearing, is definitely not the answer. Perhaps, permitting small employers to offer an automatic IRA program might help, but then again that would be adding another option to the expanding plethora of retirement vehicles already available for the small employer (SIMPLE IRA, SEP IRA, payroll deduction IRA–traditional or Roth, and qualified plans). Having that many options, unfortunately, tends to confuse them into inaction.
The IRS has taken great steps in the last few years to help alleviate this confusion by providing on their website some helpful materials for small business owners (which Tom Reeder, IRS Benefits Tax Counsel, describes here in his testimony). You can access some of their materials here: Retirement Plan Product Navigator, the IRA Online Resource Guide – Information for Business Owners, Check-Up for Your SIMPLE IRA, SEP or Similar Plan, Publication 3998, Choosing A Retirement Solution for Your Small Business, and the 2008 Small Business Resource Guide.