U.S. News: Contours of Retirement Plan Idea

 

 

“The Trump administration is pushing to expand access to retirement accounts for people who can't get them through their jobs.

 

President Trump said Tuesday in his State of the Union address that, starting next year, millions of Americans without access to employer-sponsored retirement plans could invest in a plan that is similar to federal workers' 401(k)-style investments. Known as the Thrift Savings Plan, that government plan features low-cost investment options, including diversified target-date funds.

 

Trump said the government would also provide a matching contribution of up to $1,000 a year for people who contribute to any type of retirement account. Congress already created that match for low- and moderate-income Americans in bipartisan 2022 legislation. It is set to start in 2027.

 

Trump's embrace of expanded retirement-account access was one of the few bipartisan policy notes. Lawmakers in both parties have been working together on bills for the past decade to sweeten the tax benefits for retirement savings.

 

"The substance is fully bipartisan and that was true before he said a word in the speech," said John Lettieri, chief executive of the Economic Innovation Group, who has been talking to administration officials about the idea.

 

The White House said the administration hopes the initiative will allow workers who are outside the current employment-based retirement-savings system to expand their wealth substantially.

 

About 30% of the private-sector workforce lacks access to an on-the-job retirement-savings plan, according to the Labor Department. While those people can save in individual retirement accounts, many fail to do so, owing to a lack of awareness, difficulty committing to saving or trouble completing paperwork.

 

Those without coverage include many lower-income Americans who work for smaller businesses, which have lagged behind larger ones in offering 401(k)s, because of the time and cost of setting them up.

 

The White House provided few details of how the Trump plan would work, including whether any workers could be automatically enrolled or how the administration would encourage people to sign up. Participation rates in 401(k) plans without automatic enrollment are significantly lower.

 

The administration said it is constructing a mechanism for people to save and use the new government match without additional legislation from Congress.

 

Because the giant Thrift Savings Plan probably lacks the capacity or authority to add millions of private-sector workers, the administration would need to ask Congress to pass legislation to create a similar plan, said Mark Iwry, a former Treasury Department official who oversaw national retirement policy in the Clinton and Obama administrations.

 

Creating automatic enrollment in these new accounts or providing a larger match would also likely require new legislation.

 

There is already a bipartisan bill that would create new access to a plan like the Thrift Savings Plan and offer a broader federal matching contribution. That effort is led by Sen. John Hickenlooper (D., Colo.), Sen. Thom Tillis (R., N.C.), Rep. Lloyd Smucker (R., Pa.) and Rep. Terri Sewell (D., Ala.).

 

If the president is serious, Hickenlooper said Wednesday, he would be willing to work with him on the issue.

 

Iwry said Congress might instead consider enacting an automatic IRA program for broader coverage sponsored by Rep. Richard Neal (D., Mass.). If the Democrats win control of the House in November, Neal would likely become chairman of the tax-writing House Ways and Means Committee.

 

Neal's plan would require most employers that don't sponsor a plan to auto-enroll their workers in IRAs managed by financial-services companies.

 

Neal was optimistic in an interview Wednesday about the prospect of retirement-policy legislation, if Trump leaned in to it. "It's doable if the president were to say to the Republicans, 'Stop this talk about saying you're opposed to a mandate,'" he said.

 

One factor in favor of the IRA program is that it has received support from 401(k) administrators and other industry groups. A program that is based instead on a Thrift Savings Plan clone could attract industry opposition, owing to concern that companies might not adopt 401(k)s or might abandon their 401(k) plans for the government-backed option, said Iwry.

 

The $1,000 match enacted in 2022 expands a current tax credit that many people qualify for but don't use. It will be available next year to eligible 401(k) or IRA savers, said Iwry.

 

The idea of boosting retirement savings for lower-income workers already has key support in the administration, namely from Kevin Hassett, director of the National Economic Council.

 

In 2021, Hassett and the New School economist Teresa Ghilarducci published a proposal similar to the one Trump spoke about Tuesday.” [1]

 

1. U.S. News: Contours of Retirement Plan Idea. Tergesen, Anne; Rubin, Richard.  Wall Street Journal, Eastern edition; New York, N.Y.. 26 Feb 2026: A4.