AARP, Democrats Want To Make IRA’s Mandatory In The Private Sector

LAS VEGAS - JULY 24: U.S. Senate Majority Leader Harry Reid (D-NV) speaks at the fifth annual Netroots Nation convention at the Rio Hotel & Casino July 24, 2010 in Las Vegas, Nevada. Netroots Nation, formerly called the YearlyKos Convention, is a convention for political activists and bloggers. (Photo by Ethan Miller/Getty Images)

They’re calling it a way to make Americans save more, as opposed to spending more, which is puzzling given how many of their economic policies are based on Americans spending as if there is no tomorrow.

But even setting that aside, what do you think saddling private businesses with yet another benefits requirement (on top of the onerous requirements just put into law by Obamacare) are going to do to the nation’s economy?

The White House and congressional Democrats, with the backing of the AARP, will soon put forth a plan to automatically enroll new private-sector employees in investment retirement accounts (IRAs).

The measure will apply to new workers at firms that don’t currently offer 401(k) retirement plans, according to AARP, the lobby group for seniors. Workers would have the choice of opting out of the accounts.


Top officials in the administration, including White House Budget Director Peter Orszag, Treasury Department senior adviser Mark Iwry and Cass Sunstein, the administrator of the White House Office of Information and Regulatory Affairs, have long championed the opt-out provision. They point to studies that show the arrangement leads to big increases in savings by workers.

Like other employer-based retirement accounts, the opt-out accounts proposed by Democrats would have tax benefits. It’s unclear whether they will be traditional tax-deferred accounts or Roth-style vehicles, in which account holders don’t pay taxes on withdrawals. Iwry, a retirement savings expert, has preferred Roth accounts in the past.

This would further kill job creation by inflating the price of employment. Requiring businesses to provide retirement benefits inflates the cost of those businesses hiring new workers. Which, in turn, means they’ll hire fewer workers.

What’s maddening is that the politicians and special interests pushing this are getting sanctimonious about Americans needing to save more. They’re absolutely right as far as that goes. Americans need to stop spending more than they have. They need to stop living hand-to-mouth. But a government mandate on businesses to provide retirement benefits is hardly the way to fix that problem.

Instead, perhaps the government should stop giving incentives for spending? What was cash-for-clunkers if not a government incentive to spend? What are the seemingly never-ending subsidies for mortgages and home ownership if not incentives for Americans to spend?

We don’t need this mandate. We need the government to stop manipulating our markets.

By the way, there’s some question in the article as to what sort of retirement accounts will be mandated by this legislation. How much do you want to bet it will end up being exactly the sort of retirement accounts offered by the AARP?

Rob Port

Rob Port is the editor of In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters.

Related posts