As part of the $3.5 trillion tax-and-spend plan, Democrats have proposed a provision which would require companies to automatically enroll workers into retirements plans like IRAs or 401(k)s.  

This draft provision would require that employers direct 6 percent of each employee’s pay into a retirement savings plan, gradually escalating to 10 percent, unless the employee decided to opt out or change their contribution rate. 

In turn, all businesses must offer a retirement plan and then must comply with these specific requirements that create administrative costs. If a company does not comply, they’ll be charged a tax of $10 per employee per day.  

Many have mistakenly described this provision as a “bipartisan” effort, because the automatic enrollment provision was included in the bipartisan ‘Setting Every Community Up for Retirement Enhancement Act of 2021’ or the SECURE Act 2.0. This legislation was introduced in May of this year by Ways and Means Committee Republican Leader Kevin Brady (R-Texas) and Chairman Richard E. Neal (D-Mass.). 

However, the SECURE Act 2.0 contained several incentives and cost-recovery provisions for businesses hit by these new requirements. These provisions are excluded from the automatic enrollment proposal in the $3.5 trillion reconciliation package. 

For example, the SECURE Act 2.0 would have expanded the credit for small employer pension plan startup costs from 50 percent of administrative costs to 100 percent of administrative costs for employers with up to 50 employees. Additionally, it attempted to eliminate outdated barriers on multiple employer plans (MEPs) in order to make them more efficient and less costly, helping small employers offer their own independent plans. The legislation would have also helped promote the saver’s credit to increase utilization, enhance 403(b) plans, offer immediate financial incentives for contributing to a plan, and more.  

To be clear, the “inclusion” of the SECURE Act 2.0 in the reconciliation package is not reflective of the bipartisan, fiscally-responsible, business-friendly version of the original bill, which advanced out of Committee unanimously on a bipartisan basis. In fact, changing this bill so dramatically and including it in the reconciliation undermines the spirit of bipartisanship.  

This is certainly not the first time congressional Democrats have done this. In the original SECURE Act passed in 2019, despite the bill unanimously passing the House Ways and Means Committee, Speaker Nancy Pelosi removed a provision to expand 529 Education Savings Accounts in order to appease teachers’ unions and liberals who oppose homeschooling. While Pelosi’s actions in 2019 didn’t serve as a reason to oppose the bill, the changes made in the SECURE Act 2.0 impose an undue burden on businesses without including necessary relief.