Part of the $3.5 trillion reconciliation package moving through Congress would make workplace retirement savings plans mandatory, largely regardless of company size. But that could be a burden to smaller employers, according to one expert.

"That's a pretty heavy-handed mandate," Gordon Gray, director of fiscal policy at American Action Forum recently told Yahoo Finance Live (video above). "There is a worthwhile goal to encourage more people with access to participate in these plans, but I am concerned about the burden on employers — particularly coming out of the pandemic."

Gray explained that the provision would require employers with as few as six employees to create workplace retirement plans and auto-enroll their employees. Businesses would get a tax credit to help offset additional expenses.

If passed, retirement savings plans would be available to the majority of working Americans, encouraging more people to actively participate in their financial futures.

"The motivation is sound and well-taken, which is that we know there are millions of workers with access to retirement programs at their workplace, but not everybody actually utilizes them," Gray said.

Retirement auto-enrollment 'could be a considerable burden'

Before the pandemic, 79% of American workers have an employer that offers a retirement plan, but only 41% of workers make contributions to a plan, according to the Census.

The financial responsibility also falls on workers, he explained. The auto-enrollment provision also requires workers to contribute 6% of their income into the retirement plan.

“For lower-income Americans, that could be a considerable burden,” Gray said. “That would really take a hit on their disposable income.”

That's where a second provision of the plan comes in. The bill also expands the SAVERS Credit by making it refundable, so even those who don’t owe any taxes would qualify for the benefit.

The retirement saver’s credit, more formally known as the Retirement Savings Contributions Credit, provides either a 50%, 20%, or 10% credit dependent on a filer’s adjusted gross income but cannot exceed $66,000.

"There's a rationale that if you're going to mandate workers who otherwise aren't contributing to their retirement, then it follows to provide — particularly low-income Americans — with a little bit of assistance," he said.

Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @SJAsymkos.

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