The SPARK Institute's option would limit contributions to $10,000, higher than the typical IRA, would “simplify” investment option selection, among other things.
The SPARK Institute, a group that represents retirement plan service providers, has come up with an alternative to the Obama administration’s proposal that would require employers who don’t offer 401(k) plans to enroll workers in direct-deposit individual retirement ac¬counts automatically.
The proposal from the Society of Professional Asset Managers and Record Keepers would require employers with fewer than 100 employees to set up automatic payroll deductions so employees can put money in an IRA.
It would limit annual employee contributions to $10,000, higher than the typical IRA, and would “simplify” investment option selection and fiduciary liability issues, as well as plan administration and documentation, according to the group.
“We felt that there was a better alternative [to the Obama administration’s proposal] that would allow people to save more for retirement,” Larry Goldbrum, general counsel for SPARK, said in an interview. “We’ve tried to address all of the roadblocks for small employers in this plan.”
For example, the plans wouldn’t be subject to discrimination testing, in order to reduce compliance costs, and they would use a government-approved prototype plan document to reduce administrative and compliance costs, SPARK noted.
Mr. Goldbrum acknowledged that encouraging more small em¬ployers to offer 401(k) plans has always been a challenge for his industry.
“Our members would love nothing more than to sell all those employers 401(k) plans, but small-business employers have their reasons for not adopting them. This arrangement tries to simplify the areas where there are complications that small employers don’t want to deal with,” such as fiduciary duty and cost, Mr. Goldbrum said.
Asked about the prognosis for success, he said that he understands that there are a number of issues swirling on Capitol Hill right now.
“We’ll be making the rounds in the next few weeks and months,” Mr. Goldbrum said. “We wanted to get this out because to the extent that Obama’s automatic IRA starts to move, we want this to move on a parallel track.”
According to the White House website, its proposed auto-IRA idea has already received support from lobbyists such as AARP.
“AARP firmly believes that the automatic workplace savings ac¬count, or ‘auto IRA’ is a low-cost, high-impact way to help millions of Americans save for their retirement,” Nancy LeaMond, executive vice president of AARP, wrote in a statement on the firm’s website.
