WASHINGTON (AP) — Even proponents of President Barack
Obama’s new retirement savings program readily concede it won’t be a
cure-all for a nation of people who are saving far too little for their
golden years. Many Americans won’t be able to participate initially, and
those who do may find the benefits are modest.
Yet the Obama
administration is hoping that the savings program — dubbed "myRA," for
"my IRA" — will serve as a call to action, spurring Congress to take
more sweeping steps to shore up retirement security as company pensions
become a thing of the past. Given a presidential boost, like-minded
lawmakers are already pushing new legislation to vastly expand the
number of Americans who put away cash for retirement.
"This is a
small first step," said Nancy LeaMond, AARP’s executive vice president.
"We think it is starting to generate a debate. Our hope is there can be
action."
Aiming to help the roughly half of Americans with no
retirement plan at work, Obama announced in his State of the Union
speech Tuesday that the Treasury would create new "starter" savings
accounts. The program is geared toward low- and middle-income Americans
who lack the upfront investment that many commercial IRAs require.
Starting with as little as $25, savers could invest a little each month
in Treasury bonds and then convert the accounts into traditional IRAs
once the savings grow.
The idea is actually contained in a broader
retirement proposal that Obama has been asking Congress to take up for
years in his annual budget request. Obama wants all workers to be
automatically enrolled in IRAs unless they specifically opt out. Under
one scenario, monthly paycheck deductions would be invested in bonds
unless workers choose another option.
But Congress hasn’t acted on
the proposal. So Obama is carving out the part he can accomplish
without Congress and hoping that by raising the issue, lawmakers will
feel pressure to act and the remaining pieces will fall into place.
Call
it a "me first, now your turn" strategy — not dissimilar from the
approach Obama is taking on wages. The president is ordering a higher
minimum wage for federal contractors in hopes that Congress will take
the next step by raising the wage for all Americans.
"I could do
more with Congress, but I’m not going to not do anything without
Congress," Obama told workers at a Pennsylvania steel plant on Wednesday
as he signed a presidential memo creating the myRA program.
Yet
as with the minimum wage, the retirement program illustrates the severe
limitations in what Obama can do to alter the economic reality for
Americans when Congress refuses to go along.
Workers will only be
able to open myRA accounts if their employers agree to participate in
the program, at least initially. Although myRA has been in the works for
years, the Obama administration said Wednesday it hasn’t yet secured
any commitments from businesses to offer it, and Treasury Secretary
Jacob Lew offered no prediction for how many Americans might
participate.
The White House said it was optimistic that since the
program won’t cost much to employers, businesses will be glad to take
part. But because the program relies on paycheck deductions, businesses
that don’t use automatic payroll systems will be excluded unless and
until the administration develops a new system for them to participate.
Leading
providers of retirement accounts, including Fidelity and Vanguard, said
Wednesday they were supportive of Obama’s myRA program even though they
were still studying the details. Still, there’s scant evidence that
Congress will take up the baton from Obama by making IRAs automatic.
Seeking
to build on Obama’s momentum, Sen. Tom Harkin, D-Iowa, who chairs the
Senate’s pension panel, plans to introduce a far-reaching bill Thursday
that includes automatic IRAs. Previous attempts have stalled in both the
House and Senate.
Rep. Richard Neal, D-Mass., who has been
pushing automatic IRA bills for years, said he’s already seen new
interest in the wake of Obama’s announcement.
"A couple of
Republicans have already spoken to me this morning about it. They’d love
to figure out how to embrace it," Neal said, declining to name the
Republicans.
But after the calamitous rollout of Obama’s health
care law, skepticism is running high in Washington about big, new
government programs — especially those that touch Americans’ personal
finances. And businesses are concerned about their own liability if
employees who are enrolled involuntarily grow dissatisfied with how
their investments perform.
"Similar to the concerns with health
care, where you’re trying to expand coverage, when you mandate options,
you drive people to something that’s not as good as what the private
market is offering," said Aliya Wong, who heads retirement policy for
the U.S. Chamber of Commerce.
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