A bill before Congress seeking to increase retirement savings among workers will unnecessarily overburden small employers, according to a new report from Aite Group.

The Automatic IRA Act of 2010 will offer employees who currently lack an employer-sponsored retirement plan the opportunity to default 3% of their income in a Roth IRA account through a payroll deduction. If the bill is passed, employers with 100 or more employees will be mandated to offer the auto-enrollment IRA retirement plans in the first year, while smaller employers are being required to offer it in subsequent years. Employers that already offer a workplace retirement savings plan will be exempt.

Although Aite calls the government’s efforts a “noble charter,” a problem with the current bill is that the processing procedure for the proposed plan would require employers to make many small monthly payments that could prove to be “unduly onerous.” Instead, the Aite Group proposes that by integrating the IRA savings into the annual tax refund process, the number of payments would be reduced by 12. Participants would then see “the direct tax benefit of saving for their retirement, and eligibility for tax credits would be directly integrated into the process.”  This solution would eliminate the operational burden on employers, and also save the government $500 in tax credit per employer.

The report also lists three financial services firms that are positioned to participate in the program with minimal changes to their existing businesses: Fidelity Investments, which offers direct deposit from payroll into IRA accounts; Charles Schwab, which offers direct deposit from payroll into IRAs, and also MoneyLink, which establishes an automated account transfer from a checking account into a designated Schwab account and The Vanguard Group, which offers service similar to Fidelity and Schwab. Vanguard would likely have to make some minor infrastructure tweaks to establish a payroll deposit into a Roth IRA account.