Legislation recently introduced by Rep. Richard Neal, D-MA, ranking member of the House Ways and Means Committee, proposes what may be the most aggressive retirement policy to date.

The Automatic Retirement Plan Act of 2017 requires all private sector employers with more than 10 employees to offer a defined contribution retirement plan.

While the idea may sound like a progressive pipedream, Melissa Kahn, managing director of retirement policy at State Street Global Advisors, says it is anything but.

“We are ripe for a comprehensive retirement bill,” Ms. Kahn said. “I think there’s a very good chance we’ll be debating major legislation next year.”

In the House, Neal has been a champion of retirement issues. In 2010, he introduced legislation, based off a proposal in President Obama’s budget, that would have established an auto IRA saving program at the federal level.

That bill went nowhere—it was referred to committee days after Republicans gained control of the House.

But previous attempts to mandate retirement savings programs also stalled when Democrats controlled the House.

Now, Neal is doubling down on prior IRA proposals in mandating employer sponsorship of 401(k)s.

“It’s definitely a bold proposal, but it’s time to be bold in this area,” said Ms. Kahn. “The fact that states have been moving forward with their own plans shows a level of understanding for this huge issue confronting the country. I think Congressman Neal felt it was time to go beyond auto IRAs, which don’t really get people all the way to where they need to be.”

Last year, SSGA’s CEO, Ronald O’Hanley, penned an open letter to Congress, calling for bipartisan support for a new federal mandate. “Time is not on our side, and the cost of inaction is great,” wrote O’Hanley.

The framework he laid out largely resembles Rep. Neal’s bill, and not by coincidence. Ms. Kahn said State Street’s policy team worked closely with Neal’s staff, and other lawmakers, over the course of the last year.

“Our view is you can’t throw a mandate out there without being sensitive to the burdens on small employers,” said Ms. Kahn.

Rep. Neal shares that concern, which is why his bill goes so far to address employers’ burdens.

The bill does not require employer contributions, underscored Ms. Kahn. It sets an automatic enrollment deferral rate at 6 percent, and includes 1 percent annual increases until participants hit a 10 percent savings rate. It also includes provisions to facilitate open multiple employer plans, which allow small employers to pool assets under one plan, and transfer fiduciary liability from employers to plan providers.

Employers with up to 100 workers would have as much as $5,000 in tax credits for five years to cover the cost of plan administration. Neal sourced input from record keepers that administer small plans, and found average start up costs vary between $2,000 and $3,000.

“It’s a thoughtful piece of legislation,” said Ms. Kahn. “The tax credits, combined with the open MEPs, are designed to alleviate the burdens for small employers. Our view is that if we can remove the obstacles for open MEPs, more providers will administer them, and employers will want to join.”

Mandate, a four-letter word

According to the Bureau of Labor Statistics, only half of Americans that work for an employer with fewer than 50 employees have access to a workplace savings plan; 33 percent of Americans employed by companies with 50 to 100 workers are without access; and nearly 20 percent employed at companies with 100 to 500 workers are without access.

Convincing Congress to close those gaps with a mandate will be a heavy lift, concedes Ms. Kahn.

“Mandates are difficult to sell on both sides of the aisle,” she said. “Our country places a high value on individual freedom. But I think you reach a point in time where you say the voluntary incentives of ERISA haven’t got us to where we need to be.”

The individual mandates of the Affordable Care Act of course cut at the core of conservative ideology, and proved to be a millstone for some blue dog Democrats. Like initiatives at the state level, Neal’s bill allows participants to opt-out of savings plans. Technically, the mandate is on employers, not individuals.

Ms. Kahn says her team has reached out to members in both chambers of Congress, in both parties.

“We’re working with high-level members in both parties that have been working on retirement issues for a long time,” she said, but would not name the lawmakers. One Republican member in the House was close to co-sponsoring Neal’s bill, but was unable to commit in time for its introduction.

Other Republicans may be willing to consider a 401(k) mandate in the context of Social Security and entitlement reform. While the Trump administration has vowed to leave Social Security alone, House Speaker Paul Ryan, R-WI, has signaled his intent to move on the issue next year. Ms. Kahn said she has had conversations with some Republicans that view a sponsor mandate more favorably when paired with entitlement reform.

There is also the prospect of leveraging tax reform. The thousands of small businesses that don’t sponsor retirement plans will benefit from lower pass-through rates as early as next year, if reform is ultimately passed. A new retirement mandate could be rationalized in light of the cash that will flow from Treasury back to business owners.

“The challenge will be making the burden so light for employers that it’s not seen as a burden,” said Ms. Kahn. “It will all depend on what Republicans will want to do after tax reform. They could just rest on their laurels and go campaigning. But I think there’s a good chance we see hearings on retirement issues early next year.”

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Is 2018 the year for comprehensive retirement legislation?

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