Legislation introduced to establish portable retirement accounts

Billed as a way to help concert workers, part-time workers, and those who do not have access to an employer-sponsored account, legislation has been introduced in the House and Senate to create corporate accounts. universal and portable retreats.

The Portable Retirement and Investment Account (PRIA) Act of 2021 introduced by Representative Jim Himes (D-CT) and Senator Mark Warner (D-VA) would generally establish every American’s accounts at birth by providing a PRIA at the same time. once they receive a social security number.

The accounts would be administered by an independent board of nine people appointed by the Treasury and Labor Secretaries, the Pension Benefit Guaranty Corporation (PBGC) and the Consumer Financial Protection Bureau, and managed by selected financial institutions. After the creation of the initial account, account holders would be able to choose investment options with a qualified financial institution. There would be a “PRIA Basic” account, which would be the default option with a target date fund based on the year the beneficiary turns 65, and a “PRIA Choice” account with options to wider investment.

Employers could contribute to their employees’ PRIA, but an eligible employee would be limited to an individual:

  • whose employer does not maintain an eligible pension plan;
  • whose employment consists of work (as an employee or not) via mobile platforms; Where
  • who is not eligible to participate in the employee’s employer’s eligible pension plan.

As such, people who want to keep their 401 (k) option, IRA, or other savings plan would still have those options, but they wouldn’t be able to contribute to the PRIA as well. PRIA would also be transferable, so that employees who separate from their employer could still contribute to the same PRIA as before.

In addition, the law would allow automatic contribution agreements and automatic escalation. For the purposes of the annual contribution limit, the amount would be based on the lesser of the amount deductible under Article 219 of the Tax Code or an amount equal to the compensation included in the gross income of the individual for this tax year.

A federal contribution of up to $ 500 would be paid to the PRIA of any child born into a household that receives the EITC. Individuals would also be allowed to designate some or all of their contributions as a Roth contribution. In addition, catch-up contributions would be authorized for people aged 50 or over.

“The current retirement system does not work for all Americans,” Representative Himes said in a statement. “The options that American workers have access to can differ significantly depending on their field of employment, and the systems can be unnecessarily confusing. Additionally, many Americans lose access to retirement savings vehicles if they lose their jobs, and part-time, contract, and part-time workers are often ineligible. PRIA changes all that. Warner added, “As more Americans take on multiple jobs over the course of a career, a year, and even a day, PRIA will provide more workers with access to flexible and portable benefits such as than the retirement savings that will accompany them from employer to employer and in concert. make a concert.

The legislation will be referred to the respective tax drafting committees of each chamber – the House Ways and Means Committee and the Senate Finance Committee, of which Warner is a member.

The Ways and Means Committee recently approved legislation backed by the American Retirement Association that would create automatic retirement schemes to help strengthen the existing retirement savings system and close the coverage gap. These changes are currently included in the larger $ 3.5 trillion budget reconciliation legislation that is making its way through the House.

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