Oregon’s about to do it, Connecticut isn’t far behind and
even more states are expected to join Illinois in setting up their own
savings programs, according to a presentation Sunday at this year’s NAPA 401(k)
Summit. The motivation to do so is partly about helping Americans save for
retirement. But state lawmakers around the country also are worried about the
expense of caring for an aging population without the means to do so on its
own.
Illinois state Sen. Daniel Biss, a Democrat, is a big
proponent, having sponsored legislation creating the nation’s first state-based
IRA. Brian Graff, the CEO of the American Retirement Association, the parent of
the National Association of Plan Advisors said it isn’t just about Illinois.
Graff showed the audience a map in which 19 states were highlighted as having
introduced or are considering similar legislation.
Generally, the legislation wending its way through these
state legislatures is designed to place as little responsibility on employers
as possible. Their primary requirement would be to use payroll-deduction systems
to see that about 3 percent of employees’ compensation is deferred to the state
plan. Employers would assume no fiduciary liability for the plans’
performance.
In Illinois, the law requires businesses with 25 or more
employees that don’t already provide a retirement plan to auto-enroll workers
into an IRA. Employers not willing to participate will be subject to an
annual $250 fine per employee.
Biss said he was motivated to act in light of the
“overwhelming level of anxiety and confusion” surrounding retirement. Graff
noted the problem isn’t present in low-income households alone, citing
statistics that roughly 20 million workers earning between $30,000 and $100,000
a year don’t have access to an employer-sponsored retirement plan.
Graf noted that not having enough money for retirement is
now the No. 1 worry for many Americans. Just 52 percent of households headed by
a worker aged 55 to 64 had a 401(k) account in 2013, according to the Center
for Retirement Research at Boston College; the median balance among households
nearing retirement that had accounts was just $111,000.
On the other hand, middle-class workers are 15 times more
likely to save for their families’ retirement when they have a workplace plan
as when they are on their own, according to Sunday’s presentation. That’s why
even a tea party favorite such as Indiana’s Richard Mourdock, the former
treasurer of his state, is a supporter of efforts there to establish a state-sponsored
plan.
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