At a meeting of the Middle Class Task Force on Monday, January 25, President Barack Obama and Vice President Joe Biden, who is chairman of the task force, laid out that and other initiatives aimed at helping middle-class families. Providing economic security for such families “will be a big part of what we do in 2010 and all the way through the rest of the presidency,” White House communications director Dan Pfeiffer said in a telephone press briefing this afternoon.
At 11 meetings of the task force in the past year, the vice president has heard from parents, workers and students coming out of college, said Jared Bernstein, chief economic advisor to the vice president. The initiatives announced Monday “are aimed at helping middle-class families make ends meet, to ease some of that squeeze on middle-class family budgets,” he said.
Currently, 78 million working Americans, about half the workforce, lack employer-based retirement plans, the administration said in a fact sheet on the initiatives.
Employers that do not offer retirement plans will be required to enroll their employees in direct-deposit IRAs automatically unless the employees elect not to be enrolled in the plan. The contributions are to be matched by the saver’s tax credit for eligible families.
In the fact sheet, the administration said it is streamlining the process for employers to enroll workers in 401(k) plans automatically. New tax credits will help pay employer administrative costs, and the smallest firms will be exempt.
The administration will issue rules to improve the transparency of 401(k) fees to help workers and plan sponsors make sure fees are reasonable, and rules to encourage plan sponsors to make unbiased investment advice available to workers.
The administration also will promote the availability of annuities and other forms of guaranteed lifetime income.
In addition, clear disclosures about target-date funds will be required. “Due to their rapidly growing popularity, these funds should be closely reviewed to help ensure that employers that offer them as part of 401(k) plans can better evaluate their suitability for their work force,” the fact sheet said.
The president also called for expanding tax credits to match retirement savings and enacting new safeguards to protect retirement savings.
The child and dependent care tax credit for families making less than $85,000 a year will be raised to 35 percent of expenses, from 20 percent. All families making under $115,000 will be eligible for higher tax credits. Currently there is a 35 percent credit of the expenses for families above $15,000 in adjusted gross income, which phases down to 20 percent up to $43,000 in adjusted gross income and a 20 percent credit for all families earning above $43,000.
Student loan payments will be limited to 10 percent of discretionary income, and debt will be forgiven after 20 years of payments or 10 years of payments for people who undertake public service. Currently, yearly payments are capped at 15 percent of discretionary income, and debt is forgiven after 25 years of payments, or 10 years of payments if in public service.
More support is also being offered to help families care for elderly relatives.
Bernstein would not give any details on the cost of the initiatives or how they will be paid for. He said cost details will be revealed in the budget, which is to be released next week. Obama will talk about the initiatives in his State of the Union address Wednesday, January 27.
Most of the initiatives announced Monday are new versions of programs under discussion or are already in place, Bernstein said. But many of them “reach much higher into the middle class” or go further in helping to alleviate squeezes on middle-class budgets, he said.
Bernstein said that the “No. 1 imperative” of the administration remains to create more jobs, and he touted the administration’s $787 billion stimulus package, which he said has created or saved 2 million jobs. “But at the same time, middle-class families have been squeezed even before this recession took hold” in the areas of child care, education and saving for retirement—areas that are addressed by the initiatives.