Adobe Images President Trump recently issued an executive order calling for a federal website to encourage the opening of Individual Retirement Accounts by workers who have no retirement plan at work. But decades of efforts to promote saving in IRAs show that most ordinary households are unaware of the option or are held back by inertia.
To extend retirement saving to all workers, Trump should now support federal legislation built on the concept of automatic IRAs, which are already being successfully implemented in 17 states.
Between one-third and one-half of the U.S. private-sector workforce are not covered by an employer-sponsored retirement plan. Lower-income or high-turnover workforces tend not to demand retirement plans. Also, small-business owners lack economies of scale to minimize plan costs. They may fear the added responsibilities of plan sponsorship and resist the extra demands on their limited time.
In theory, most workers without an employer plan can open an IRA on their own at almost any financial institution. But in practice, because of lack of awareness or inertia, only a limited number do so.
To overcome these barriers, the Treasury Department in 1998 approved automatic enrollment in retirement plans, encouraging 401(k) sponsors to put all eligible employees into their plan, contributing at a pre-specified percentage of wages and investing in a pre-specified fund of diversified stocks and bonds (e.g., a balanced or target date fund). But employees are always free to opt out of the plan entirely or choose a different contribution percentage or investment.
This powerful strategy for facilitating retirement contributions and improving investments has transformed the 401(k) landscape, dramatically increasing participation, especially by lower-income and younger employees. It has been supported by nearly unanimous votes of Congress. And in 2022, bipartisan legislation required auto-enrollment in most new 401(k) plans.
To extend auto-enrollment to many more uncovered workers, one of us co-authored the federal auto-IRA bill and asked state governments to pilot it as a private-public partnership designed to ultimately apply nationwide. To date, 1.2 million workers whose employers do not sponsor a plan are instead auto-enrolled through substantially similar IRA programs facilitated by 17 states. Through competitive bidding, states contract with administrators, recordkeepers and investment managers from the private sector to operate these auto-IRA programs, with virtually no complaints from employers.
State-based auto-IRA programs simply require employers (excepting the smallest and newest) that don’t sponsor plans to let their payroll system serve as a conduit to move contributions from the company’s employees to their IRAs. Employers do not need to contribute to these IRAs, and they are not saddled with out-of-pocket costs, liability or fiduciary obligations.
Employers have no responsibility to decide on contribution levels, choose IRA investments, or comply with the Employee Retirement Income Security Act of 1974 or tax qualification requirements. They simply upload their employee roster to an auto-IRA administrator firm, which instructs the payroll provider of the employer to withhold and remit a pre-specified percentage of the employee’s pay to a pre-specified investment in the employee’s IRA.
Employees may opt out entirely or choose different contribution rates or investments. Target date funds, varying the mix of diversified stocks and bonds according to the investor’s age, are typically the default investment for state auto-IRA programs.
Importantly, state auto-IRA programs, with their compliance deadlines, support the marketing of 401(k) plans by private vendors, by encouraging employers to adopt a 401(k) plan and thereby exempt themselves from an automatic program. By design, annual contribution limits to auto-IRA programs are limited to $7,500, versus $24,500 in 401(k) plans, and employers may not contribute to auto-IRAs but may contribute to 401(k) plans. As documented by a 2026 Pew Report, employers are significantly more likely to adopt new 401(k) plans in states with auto-IRAs than in states without.
Given this proof of concept, now is the time for bipartisan federal legislation to require employers that don’t sponsor a plan to join ay state auto-IRA program unless they now adopt a plan. States without an auto-IRA program could adopt one or join the program of another state.
Similar federal auto-IRA legislation has already been proposed by Rep. Richard Neal (D-Mass.), the ranking member of the House Ways and Means Committee. That bill includes tax credits for small employers in state auto-IRA programs, at a lower level than the tax credits now available to defray the start-up costs of small employers with 401(k) plans.
In short, without burdening small employers, bipartisan auto-IRA legislation would make retirement saving easy for employees without an IRA or retirement plan at work. Such legislation would extend tax-favored retirement savings to the tens of millions of workers now left behind, fulfilling the stated intent of the recent executive order “to ensure that every American worker has access to a simple, portable, low-cost retirement-savings option.”
Robert Pozen is a Distinguished Senior Lecturer at MIT Sloan School of Management and formerly president of Fidelity Investments. Mark Iwry is a nonresident senior fellow at the Brookings Institution, visiting scholar at the Wharton School, and formerly senior adviser to the U.S. secretary of the Treasury for national retirement and healthcare policy.
Add as preferred source on Google Tags 401(k) auto-IRA Individual Retirement Accounts IRA retirement savings Richard NealCopyright 2026 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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