First there was Illinois. Then Washington. Now, Oregon is close to becoming the third state in the nation to authorize a state-run retirement-savings program for a broad spectrum of the population.
The goal: to get small businesses, many of which don’t currently offer retirement plans, to deduct contributions from employees’ paychecks and funnel them into individual retirement accounts, where money can grow tax-deferred until retirement.
On Tuesday, Oregon’s Senate passed a bill that earlier cleared the House. Governor Kate Brown is expected to sign the measure, says Mike Westling, a spokesman for Save Today, Secure Tomorrow, a coalition that supported the bill and includes the AARP’s Oregon office, the Urban League of Portland, and various labor unions.
The concept is catching on. Currently, about 25 states are either studying similar state-run retirement-savings plans or are actively considering legislation that would establish one, says Sarah E. Mysiewicz Gill, a senior legislation representative at AARP, which supports the efforts through its Work & Save initiative. States including California, Minnesota, and Connecticut are conducting feasibility studies that are likely to pave the way for similar programs aimed at all small businesses, says Ms. Gill, who expects New Jersey to pass legislation to establish plans by year-end.
States are motivated to take action partly by concern that they will otherwise have to provide assistance for retirees with insufficient savings. “Currently, nearly half of all Oregonians do not have a retirement plan at work,” says Oregon Sen. Lee Beyer (D., Springfield), a co-sponsor of the measure. “As a result, many are at risk of living in poverty when they retire—unable to cover basic living and medical expenses.”
The state plans follow different models. Oregon’s plan which is slated to be up and running by July 1, 2017, requires employers that don’t currently offer a retirement savings plan to automatically enroll employees at a default contribution rate to be determined by the Oregon Retirement Savings Board, which will consist of members of the state Senate and House, representatives of employers and employees, and appointees of the governor and state treasurer.
The program will contract with professional money managers to provide the investment options, says Mr. Westling.
Businesses won’t be required to make matching contributions to employees’ accounts. And participants’ fees haven’t been set yet.
In contrast, Washington State’s plan will leave it up to employers with 100 or fewer employees to decide whether to offer retirement savings accounts to their employees.
In California, legislation that Governor Jerry Brown signed in 2012 authorized a feasibility study of a program. The study is scheduled to be published by year-end, says Ms. Gill, who expects the state to authorize a plan in 2016.
If California’s task force decides the plan is feasible—and the legislature signs off on it—it would require private-sector companies with five or more employees that don’t currently offer a retirement plan to automatically deduct contributions from employees’ paychecks and funnel them into an IRA, at a default savings rate of 3% of salary. (Employees would be free to opt out.) The state has floated the idea of choosing a professional money manager to invest the funds in a conservative investment whose return would be guaranteed at no risk to the state. (The manager would be required to purchase insurance to protect against losses).
This article also appeared on MarketWatch Retirement.
http://blogs.wsj.com/totalreturn/2015/06/19/oregon-is-latest-state-to-tackle-retirement-savings-crisis/
Comments
Employees can already set up an IRA with
anything they want. The smart employees are paying off their mortgages instead,
so they have a place to live. I’m afraid other state legislatures will
introduce similar Bills.
Norb Leahy, Dunwoody GA Tea Party Leader
No comments:
Post a Comment