Thursday, February 25, 2010

The Presidents’ Budget Proposal: Asset Building

The President’s FY11 budget proposal includes several components that contribute to family economic success, including provisions that help low and middle-income families increase their retirement savings. Approximately half of American workers do not have an employment sponsored retirement plan. The President’s budget includes an Automatic Workplace Pension Plan requiring businesses who do not currently offer retirement plans to enroll their employees in a direct-deposit IRA account. Employees are welcome to opt-out of enrollment but the plan provides expanded opportunity for workers to begin building assets for retirement if they choose. The budget proposal also includes provision to streamline automatic enrolment. Automatic enrollment in 401k retirement plans boosts enrollment significantly, and has been particularly effective in increasing the participation of low-income workers.

In connection to the automatic IRA proposal, the budget also includes provisions to assist small businesses in creating retirement plans for their employees. The White House proposes doubling the Small Employer Pension Plan Startup Credit from $500 a year (for up to three years) to $1000 a year. This provision is meant to help small businesses with the expense of starting and administering a new retirement plan. State policymakers should consider promoting these new asset building efforts as a part of their fiscal recovery and economic development efforts.

For more information on funding proposals that could make changes on the local level see CSSP’s Financing Community Change Blog Post, Financing Community Change through the President’s FY 2011 Budget.

Policies to support Family Economic Success