Personal Finance

Millions could soon have more retirement plan options

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Millions of part-time workers and small-business employees could soon get access to more retirement savings plans.

Under new provisions in President Barack Obama's proposed 2016 budget, retirement plans would be required to allow participation from part-time workers who've worked at least 500 hours a year for three consecutive years with the sponsoring employer. This would only require that qualifying employees be able to contribute their own pretax funds to their employer's retirement plan. Employers would not be required to make the workers eligible for employer contributions (e.g. matching contributions).

A second provision would require small employers with more than 10 employees and in business for at least two years to offer an automatic IRA option to its employees, funded via payroll deductions, if it doesn't already offer another type of employer-sponsored retirement plan.

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The proposals would become effective in plan years beginning after Dec. 31, 2015. The White House estimates provisions like these could give 30 million more workers access to workplace savings opportunities.

Chances of adoption: Pretty good, though the part-time worker provision may stand the better chance as it doesn't require contributions by employers; it only allows employees to contribute to an existing plan.

What advisors are saying: Anything that gives employees more opportunities to save for retirement is positive, as long as they take advantage of it. "The single most important decision people make when saving for retirement is to check the box at work to participate [in a retirement account]," said David Bach, best-selling author and vice chairman of Edelman Financial Services. "Whether it's a 401(k) or an IRA, whatever, the most important thing is that they sign up. Then it's the percentage they save. And then it's what they invest in."

For more information on other provisions that could affect you, click here.