Can an employer offer Payroll Deduct IRA’s to their employees and as a side agreement increase the pay to the employee to add an incentive to the employee to save? This addition does not go into the savings, it just increases pay to somewhat offset the savings the employee makes.

For instance, an employee pays in 3% of their salary to the payroll deduct IRA, the employer increases the employee pay by x%, let’s say, 10% of the employees contribution as an incentive to save. The salary increase does not go toward or into the savings, it’s just an addition to pay. An agreement is created by the employee and the employer to increase pay as long as the employee saves into the Payroll Deduct IRA. If the employee quits the Payroll Deduct IRA the employer can decrease pay accordingly.

This is not the same as a SIMPLE IRA whereas the Employer creates before tax savings. This would be after tax savings which may be tax deductible for a traditional IRA or non-deductible but tax free growth for a Roth IRA. The SIMPLE also requires 100% of 1 – 3% contribution matching, which some smaller employers feel is too expensive. It also does not make the employee save very much ultimately as almost all employees only save up to the maximum match.

What I am explaining would create an incentive for people to save more, thereby creating another way to save and enhancing the amount people save while not creating additional burdens on the employer – which the government seems so good at doing.

Currently several states are creating mandatory or opt out savings initiatives. This seems very questionable.