President Obama's Retirement Initiatives Fall Short

401k porposed changes.

Like it or not, President Obama's plan to overhaul health insurance can safely be described as ambitious.

The same cannot be said for his efforts so far to improve the retirement finances of American workers.

Over the Labor Day weekend, the president announced several initiatives designed to make it easier for Americans to save for retirement. Individually, each of the changes makes sense and should help in small ways.

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But as a whole, the package left me underwhelmed. 'That's all?' I thought as I reviewed the details of the initiative released by the White House.

There was no proposal to overhaul 401(k) accounts that many in the personal-finance field believe is necessary. Nor was there a call to shore up Social Security. And nowhere was there anything meant to address serious underfunding in many state and local government pension systems.

Instead, the president offered a series of small-rule changes that can be implemented by the Treasury Department and the Internal Revenue Service without the need for legislation requiring congressional approval.

Earlier, Obama had proposed to Congress a couple measures to help spur retirement savings.

One proposal would create automatic IRAs for workers who don't have an employer-sponsored retirement plan. Under this plan, affected workers would be enrolled automatically in an IRA funded by payroll contributions.

The second legislative proposal would expand an existing retirement savings credit for low- and middle-income workers.

These proposals await congressional action.

Again, they are nice ideas, but not anything too far reaching.

Here's a summary of what the president announced on Saturday that will take effect right away.

Expanded automatic enrollment in retirement savings plans: This expansion of the automatic enrollment now allowed in 401(k) plans and other types of employer-sponsored retirement savings plan will be achieved through new IRS policies. Automatic enrollment has been shown to increase worker participation in retirement savings plans, but still allows for workers to opt out.

The new IRS policies will streamline the adoption of automatic enrollment by small businesses. Preapproved language issued by the IRS will make it easier -- and cheaper -- for small businesses to adopt automatic enrollment by eliminating the need for case-by-case approval.

In addition, a new IRS ruling explains how businesses can adopt a retirement-plan feature that will allow employees to automatically dedicate a portion of each pay raise to increased retirement savings.

The IRS also issued model language to allow Simple IRA plans also to automatically enroll employees. The Simple IRA is a small-business retirement plan that operates like a 401(k) in many ways but is much cheaper for companies to administer.

A new way to save federal tax refunds: Beginning next year, taxpayers will have the option to use their federal tax refund to purchase U.S. savings bonds. They would just check a box on their returns, and the savings bonds would be mailed to them by the U.S. Treasury.

The savings option for refunds would be in addition to current procedures allowing for direct deposit into savings accounts or IRAs.

Only Series I savings bonds, which include an inflation-adjustment factor, will be available for purchase by tax refund. Series EE bonds, which feature a fixed rate of interest, are not available through this program.

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