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By Ethan Wolff-Mann
January 26, 2016

On Tuesday, the Obama administration announced plans to make it easier for small businesses to provide 401(k) retirement plans to their employees.

According to the White House, over half of the 31 million people who work for a business with fewer than 50 employees don’t have access to a retirement savings plan, due to the high costs and other administrative difficulties that pinch employers. This leaves one in three workers nationwide unable to sign up for a 401(k), today’s standard vehicle for retirement savings now that traditional pensions are as rare as unicorns.

The administration’s proposal, which comes as a part of the 2017 budget that Congress will vote on, makes it easier for smaller companies to band together to share some of the burden of 401(k) costs. Such as strategy has been possible in the past, but it was often difficult for companies unless they were closely related. Now unrelated small businesses can theoretically work together to enjoy economies of scale required to provide this important benefit. As further motivation, tax credits are on the table to nudge these businesses to participate.

If a small business still does not offer a 401(k), the administration proposes that these workers, which include long-term part-timers, will be required to automatically enroll in an IRA. According to the administration, just 10% of workers without access to a 401(k) plan actually save for retirement on their own. Anyone not in an IRA can use the Treasury’s young “myRA” account, which safely allows anyone to contribute.

The administration also aims to tackle portability issues by creating pilot programs for new approaches using certain non-profits as guinea pigs. Today a career may span up to a dozen jobs (or more, even) and jumping from one company’s plan to the next is difficult. The administration hopes to make plan-to-plan rollovers easier so retirees aren’t left with tons of tiny accounts, and to ensure that bankrupt companies don’t take their plans down with them.

Additionally, the administration reaffirmed its commitment to seeing a fiduciary rule through to prevent conflicts of interest between financial advisers and clients.

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