Jan.NASI : A New Era of State Action to Help Build Retirement Security
The National Academy of Social Insurance (NASI) held a roundtable discussion with AARP to discuss state activity regarding the creation of state-run retirement plans for small business employees and other workers currently without access to an employer-sponsored plan.
Speakers at the event included:
- Debra Whitman, Executive Vice President, AARP
- Spencer Cowan, Vice President, The Woodstock Institute
- John Burbank, Executive Director, Economic Opportunity Institute
- Nari Rhee, Manager of Research, National Institute on Retirement Security
- State Sen. Kevin de Leon, California State Senate: The California Secure Choice Retirement Savings Program
- Moderator: David John, Senior Strategic Policy Advisor, AARP
Debra Whitman set the stage for the event saying that millions of private sector employees lack access to payroll deduction retirement savings plans or pensions. She noted that states are exploring the creation of retirement savings plans for small business employees.
Spencer Cowan gave a presentation on “The Scope of Retirement Insecurity Among Illinois Workers.” He noted that Illinois is in an “especially difficult situation” since their pension system is currently $100 billion underfunded. Cowan described the current state of retirement savings in Illinois and the nation, adding that the lower quintiles are heavily dependent on Social Security.
Illinois introduced legislation in 2013 to create a state-run automatic IRA program but the bill was not heard in committee and died in the session. The State plans to propose new legislation to create the “Illinois Secure Choice Savings Plan,” which is similar to the automatic IRA legislation from 2012. The policy proposal would feature automatic enrollment with an opt-out provision, and would aim to be portable, immediately vested, and tax advantaged. The default investment option would be expected to be similar to a target date fund and participants would be automatically enrolled at a default contribution rate of three percent. He is optimistic the legislation could be passed this year.
John Burbank gave a presentation on the Washington state initiative, “Creating the ‘Save Toward a Retirement Today’ (START) Retirement Savings Plan.” He described the plan as being a deferred compensation system through a workplace-based IRA that would be voluntary for employers. Participants would be automatically enrolled with an option to opt-out and it would be portable between jobs. Burbank highlighted a website on the effort, http://startwa.org/.
Nari Rhee gave a presentation on “California Workers Without Access to Retirement Savings Plans.” She gave an overview of the current challenges facing retirees and workers in California and the “private sector retirement gap.”
During a question and answer portion of the event, it was proposed that some of the opposition from businesses and employers may be related to concerns about fiduciary responsibilities. Burbank responded that the main opposition is from the financial services industry and said in Washington, the aim is to have the State bear the fiduciary responsibilities rather than the employer. Cowan added that the main responsibility of the employer will be administrative.
Another question asked about the opposition from the financial industry that these state-run plans will interfere with business already being conducted in the states. David John said he did not think the state-run plans would intrude upon other private-sector plans.
When asked about the concern of leakage from plans, Rhee responded that California does not foresee that as a major problem, as the plans will be portable from job to job. Another question was asked regarding the portability from state to state. The panelists suggested there could be an option to roll it over to a new or another state’s plan, but said it is “too early to tell.”
In response to a question about the applicability of the Employee Retirement Income Security Act (ERISA) and the lack of concern among states in that regard, panelists responded that they are trying to avoid the application of ERISA by crafting the plans as IRAs. An audience member mentioned that the Department of Labor’s expected re-proposal of the definition of fiduciary could subject IRAs to ERISA liability, and that would need to be taken into consideration.
When asked if a voluntary state-run retirement plan could really make a difference in the retirement gap, Rhee responded that a voluntary plan would need to conduct large marketing efforts to really be helpful, adding that a mandate would be beneficial administratively as it would tap into the existing framework, and said a mandate would allow the plan to easily build up to scale.
When asked about their thoughts on the President’s “MyRA” plan mentioned during the State of the Union, panelists were pessimistic it would be much help, saying that as a voluntary program with an opt-in provision it is not likely to get the participation or universality needed to address the savings problem faced in America.
California State Senator Kevin de Leon attended via webcast and spoke about the California Secure Choice Retirement Savings Program. Legislation passed in 2012 called for the creation of an independent board to study the possible creation of a state-run retirement plan. Features of the potential plan would include automatic enrollment, payroll deduction, and guaranteed principal. There would not be an employer matching contribution. De Leon said he views this as an opportunity for a “public-private partnership,” and said he is trying to be innovative. The next phase of the project is to conduct the study, which he said is about 60 percent funded so far.
When asked about protections for surviving spouses, de Leon noted it is not outlined in the legislation, but it is an issue the California Secure Choice Retirement Savings Investment Board will be tackling.
An audience member asked how employers have responded to the legislation. De Leon responded that, in the beginning, employers were opposed due to “misinformation about ERISA” applicability and an employer matching contribution. He added that after “lots of handholding,” things have changed and more people are on board.
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The National Academy of Social Insurance (NASI) held a roundtable discussion with AARP to discuss state activity regarding the creation of state-run retirement plans for small business employees and other workers currently without access to an employer-sponsored plan.
Speakers at the event included:
- Debra Whitman, Executive Vice President, AARP
- Spencer Cowan, Vice President, The Woodstock Institute
- John Burbank, Executive Director, Economic Opportunity Institute
- Nari Rhee, Manager of Research, National Institute on Retirement Security
- State Sen. Kevin de Leon, California State Senate: The California Secure Choice Retirement Savings Program
- Moderator: David John, Senior Strategic Policy Advisor, AARP
Debra Whitman set the stage for the event saying that millions of private sector employees lack access to payroll deduction retirement savings plans or pensions. She noted that states are exploring the creation of retirement savings plans for small business employees.
Spencer Cowan gave a presentation on “The Scope of Retirement Insecurity Among Illinois Workers.” He noted that Illinois is in an “especially difficult situation” since their pension system is currently $100 billion underfunded. Cowan described the current state of retirement savings in Illinois and the nation, adding that the lower quintiles are heavily dependent on Social Security.
Illinois introduced legislation in 2013 to create a state-run automatic IRA program but the bill was not heard in committee and died in the session. The State plans to propose new legislation to create the “Illinois Secure Choice Savings Plan,” which is similar to the automatic IRA legislation from 2012. The policy proposal would feature automatic enrollment with an opt-out provision, and would aim to be portable, immediately vested, and tax advantaged. The default investment option would be expected to be similar to a target date fund and participants would be automatically enrolled at a default contribution rate of three percent. He is optimistic the legislation could be passed this year.
John Burbank gave a presentation on the Washington state initiative, “Creating the ‘Save Toward a Retirement Today’ (START) Retirement Savings Plan.” He described the plan as being a deferred compensation system through a workplace-based IRA that would be voluntary for employers. Participants would be automatically enrolled with an option to opt-out and it would be portable between jobs. Burbank highlighted a website on the effort, http://startwa.org/.
Nari Rhee gave a presentation on “California Workers Without Access to Retirement Savings Plans.” She gave an overview of the current challenges facing retirees and workers in California and the “private sector retirement gap.”
During a question and answer portion of the event, it was proposed that some of the opposition from businesses and employers may be related to concerns about fiduciary responsibilities. Burbank responded that the main opposition is from the financial services industry and said in Washington, the aim is to have the State bear the fiduciary responsibilities rather than the employer. Cowan added that the main responsibility of the employer will be administrative.
Another question asked about the opposition from the financial industry that these state-run plans will interfere with business already being conducted in the states. David John said he did not think the state-run plans would intrude upon other private-sector plans.
When asked about the concern of leakage from plans, Rhee responded that California does not foresee that as a major problem, as the plans will be portable from job to job. Another question was asked regarding the portability from state to state. The panelists suggested there could be an option to roll it over to a new or another state’s plan, but said it is “too early to tell.”
In response to a question about the applicability of the Employee Retirement Income Security Act (ERISA) and the lack of concern among states in that regard, panelists responded that they are trying to avoid the application of ERISA by crafting the plans as IRAs. An audience member mentioned that the Department of Labor’s expected re-proposal of the definition of fiduciary could subject IRAs to ERISA liability, and that would need to be taken into consideration.
When asked if a voluntary state-run retirement plan could really make a difference in the retirement gap, Rhee responded that a voluntary plan would need to conduct large marketing efforts to really be helpful, adding that a mandate would be beneficial administratively as it would tap into the existing framework, and said a mandate would allow the plan to easily build up to scale.
When asked about their thoughts on the President’s “MyRA” plan mentioned during the State of the Union, panelists were pessimistic it would be much help, saying that as a voluntary program with an opt-in provision it is not likely to get the participation or universality needed to address the savings problem faced in America.
California State Senator Kevin de Leon attended via webcast and spoke about the California Secure Choice Retirement Savings Program. Legislation passed in 2012 called for the creation of an independent board to study the possible creation of a state-run retirement plan. Features of the potential plan would include automatic enrollment, payroll deduction, and guaranteed principal. There would not be an employer matching contribution. De Leon said he views this as an opportunity for a “public-private partnership,” and said he is trying to be innovative. The next phase of the project is to conduct the study, which he said is about 60 percent funded so far.
When asked about protections for surviving spouses, de Leon noted it is not outlined in the legislation, but it is an issue the California Secure Choice Retirement Savings Investment Board will be tackling.
An audience member asked how employers have responded to the legislation. De Leon responded that, in the beginning, employers were opposed due to “misinformation about ERISA” applicability and an employer matching contribution. He added that after “lots of handholding,” things have changed and more people are on board.