States Ignore Washington on State-Run IRAs
Despite last week’s vote in the Senate to end support for state-run retirement programs for private-sector workers, several states plan to push ahead, the Wall Street Journal reports.
The Senate last week voted to repeal a rule introduced last year by the Department of Labor encouraging states to set up automatic individual retirement plan enrollment programs for millions of private-sector employees whose companies don’t offer retirement plans, according to the newspaper.
At least 20 states have already introduced bills this year to consider auto-IRA programs, and seven states – including California, Illinois, Maryland and Oregon – have approved their programs, the Journal reports.
Following the Senate vote, Oregon State Treasurer Tobias Read said his state will continue pressing on with its program, which is expected to become open to a limited number of companies in July, according to the paper.
The states may face opposition from opponents of auto-IRA programs, such as firms that offer 401(k) plans to small companies, John Scott, director of the Retirement Savings Project at the Pew Charitable Trusts, tells the Journal. Some of that opposition may lead to legal challenges but officials in Illinois, Maryland and Oregon have said they believe they can beat them, the paper reports.
Not all states are pressing ahead, according to the Journal. Montana’s legislature failed to approve a bill for its auto-IRA program on the grounds of expected pushback from Congress, Cristina Martin Firvida, director of financial security at the advocacy group AARP, which supports such programs, tells the paper.
Other states are mulling alternatives to the auto-IRA model, such as voluntary programs for employers in which employees could also opt out of the plans, programs in which workers could choose to contribute to a retirement account, state-run marketplaces in place of coverage requirements, and initiatives to offer a range of choices, including multiple-employer 401(k)s and payroll-deduction plans, the Journal writes.