Legislation Says American Businesses Must Offer Pension Retirement Plan

NEW YORK (MainStreet) — Solutions to the American retirement crisis are being floated from nearly every oak desk in Washington. Just days after President Barack Obama announced the MyRA savings plan during his State of the Union speech, U.S. Senator Tom Harkin (D-Iowa) has rebooted his private pension plan originally proposed in 2012.

Harkin's legislation, the Universal Secure and Adaptable (USA) Retirement Funds Act of 2014, would mandate businesses with ten or more employees to offer the proposed USA retirement account to their workers, if they don't currently provide a 401(k) or pension plan.

The USA Retirements Funds Act would create a privately-run retirement plan with lifetime income benefits and pooled, professional management -- with the portability of a 401(k).

"The USA Retirement Funds Act is particularly good for small business owners," Harkin says. "It would allow them to offer more competitive benefits to their employees while at the same time relieving them of the burden of managing a pension plan themselves."

The legislation proposes coverage for every working person in America, including the more than 61 million people without access to a workplace retirement plan, as well as the 14.5 million people who are self-employed.

Employees would be automatically enrolled at a rate of 6% per year, but could choose to raise, lower or opt-out of contributions.

Individuals could make pre-tax salary deferrals of up to $10,000 per year, while employers would have the option of making contributions of up to $5,000 per year for each employee. Low-income individuals would be eligible for a "refundable savers credit."

Participants would not be allowed to make withdrawals from the plan before age 60 or take lump-sum payments -- benefits would be paid monthly for life, with survivor benefits and spousal protections, similar to those offered by traditional pension plans.

"Participants would be shielded from market volatility and other risks," according to Harkin.