NCPA - National Center for Policy Analysis


November 15, 2006

To encourage more Americans to save for retirement, Congress should mandate that all employers not otherwise offering a retirement plan establish a check-off IRA (CIRA) for their employees, says Robert C. Pozen, chairman of MFS Investment Management.

How do CIRA plans work?

  • An employer could take out a minimum percentage (e.g., 3 percent) of their employees' wages from their paychecks, tax deductible in the year of contribution.
  • Employees would have 60 days from their enrollment date to increase their contribution rate or to opt out completely of any payroll deduction.
  • The employer utilizing this auto-enrollment approach would be protected from legal liability by a safe harbor, if the employer followed specified procedures and provided specified disclosures.


  • Payroll deductions would be presumptively invested in a balanced fund -- with 50 percent in a diversified stock fund and 50 percent in a high-quality bond fund.
  • Again, employees would have 60 days from their enrollment date to opt out of the balanced fund by choosing from a slate of investment alternatives.
  • The CIRA sponsor would again be legally protected by another safe harbor if it offered the appropriate funds.

However, so it does not become burdensome for firms with few employees, small and large businesses would be treated differently:

  • Small employers would not be required to make any contribution to a CIRA, nor would they have to satisfy the complex IRS tests for anti-discrimination.
  • Instead, they would be required only to connect their payroll system to a qualifying financial institution offering a CIRA.
  • By contrast, if a larger employer chose to adopt a CIRA rather than a 401(k) plan, that large employer should additionally be required to make a reasonable contributions to participating employees
  • To smooth the transition for growing companies, this matching requirement could be limited to employers with 100 or more employees for three consecutive years.

Source: Robert C. Pozen, "Que CIRA, CIRA . . .," Wall Street Journal, November 15, 2006.

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