House Considers Auto-Enrollment Legislation

The proposed bill would require nearly all US companies to enroll workers in a retirement plan.


The House Ways and Means Committee is continuing to work on legislative proposals under the budget reconciliation process that would require companies without employer-sponsored retirement plans to automatically enroll their workers in individual retirement accounts (IRAs) or 401(k)-type plans.

The bill is part of President Joe Biden’s “Build Back Better” agenda, which aims to create jobs, cut taxes, and lower costs for working families, while changing the tax code to require the wealthiest individuals and large corporations to pay more in taxes.

“The Ways and Means Committee will put an end to the idea that only some workers are worthy of ‘perks’ like paid leave, child care, and assistance in saving for retirement,” Ways and Means Committee Chairman Richard Neal said in a statement.

The proposed automatic enrollment requirement would apply to companies with five or more employees that have been in business for at least two years, and would grandfather in employers that already maintain a qualified retirement plan. Participation in an existing state program that requires employers to enroll employees in workplace savings arrangements would also satisfy the requirement.

For more stories like this, sign up for the CIO Alert newsletter.

The bill also sets target-date funds (TDFs) as the default investment, and requires available investments to include those and only principal preservation funds and balanced funds with no other investment alternative allowed. Employers that do not comply with the requirements would be subject to an excise tax of $10 per day per employee not covered by an automatic contribution plan or arrangement.

In addition to requiring employers to automatically enroll their employees in a retirement plan, the legislation would make the Saver’s Credit refundable so that people without any income tax liability would be eligible to receive the benefit in the form of a contribution to their retirement account. It would also designate Roth IRAs as the default form of retirement plan unless the participant decides otherwise. 

The proposed legislation is the latest in a slew of bills that have been introduced or reintroduced this summer that aim to boost retirement savings for Americans.

Last month, US Sens. Cory Booker, D-New Jersey, and Todd Young, R-Indiana, reintroduced four bills they say will help increase retirement security for individuals and families. And in July, Sen. Patty Murray, D-Washington, and Rep. Lauren Underwood, D-Illinois, reintroduced the Women’s Retirement Protection Act of 2021, which aims to help close the retirement gender gap by addressing the financial challenges that disproportionately affect women.

Related Stories:

Senators Reintroduce Bills to Bolster Retirement Savings

US House Eyes Improving Small Employer Retirement Plans

Senate Bill Targets Women’s Retirement Savings Inequities

Tags: , , , , , , , , , ,

Why Wall Street Is Eyeing a Correction Coming Soon

Numerous strategists think things are getting dicey as we enter stocks’ lousiest month historically.


The correction chorus is getting louder. While this doesn’t necessarily mean a stock market downturn of at least 10% (that’s the correction definition) is imminent, the array and prominence of the Cassandras is worth noting. September is historically the worst month for stocks, and last week started things off with a 1.7% drop.

Julian Emanuel, chief equities and derivatives strategist at global financial services firm BTIG, is looking at an 11% downturn up ahead. The S&P 500 has been on a seven-month run, until recently, and Emanuel told CNBC this rally reminds him of 1999, right before stocks took a dive. “Be very much aware of the fact that if and when it reverses, the consequences could be severe,” he said of the market.

“The risk that the correction is hard is growing,” wrote Deutsche Bank equity strategists including Binky Chadha in a downbeat note, one of several compiled by Bloomberg. “Valuation corrections don’t always require market pullbacks, but they do constrain returns.”

Areas of concern on Wall Street are very high market valuations—a 31 trailing price/earnings (P/E) ratio—combined with lowered projections for economic growth, the ongoing coronavirus outbreak, and the Federal Reserve’s pending plan to taper its bond-buying spree. Right now, despite last week’s dip, the S&P 500 still hovers near its record. The index’s market cap is 175% of US gross domestic product (GDP), also a record.

For more stories like this, sign up for the CIO Alert newsletter.

But another uneasy indicator is that since hitting its bear-market low in March 2020, investors are borrowing more. Margin debt has leapt 79% to $844 billion, data from the Financial Industry Regulatory Authority (FINRA) shows.

While not everyone is saying specifically that there will be a tumble of 10% or more, the negative outlooks are hard to ignore. “We are going to have a period where data is going to be weak in September at the time when you have a heightened risk of Delta variant and school reopening,” contended Andrew Sheets, cross-asset strategist at Morgan Stanley. The firm last week demoted US stocks to underweight.

“Global stock markets may be entering a period of turmoil,” predicted James Congdon, co-head of Canaccord Genuity’s research division Quest. And “while the broad US market outlook is solid in our central case, we think peak cyclical optimism in the US may be behind us,” commented Dominic Wilson, strategist in economics research at Goldman Sachs.

Corrections are rather frequent, coming once every 1.9 years since the middle of the 20th century, according to Yardeni Research. Since 1950, the market has been hit with a 10%-plus decline 38 times. Through last week, by the reckoning of Dow Jones Market Data, the S&P 500 has logged 214 trading days without a 5% downdraft, climbing more than 33%. That marks the longest period without a pullback since a 404-day stretch that ended in February 2018.

Related Stories:

Giant Tech Stocks Primed for Another Slide, Says Sage

Stocks Usually Stink in August, but Bonds…

Drama Aside, Meme Stocks Are Having a Good Year So Far

Tags: , , , , , , , , ,

«