Many states are considering implementing a new type of pension plan for private-sector workers that uses the efficiencies of the state run public retirement systems to administer them, according to the Pension Rights Center.
California, Connecticut, Massachusetts and New York City have all seen bills introduced in the legislature that would organize such a plan.
In May, the California Senate passed the California Secure Choice Retirement Savings Trust Act, which would require businesses with more than five employees to enroll in a new personal pension defined benefit retirement plan unless they already offer a retirement plan of some kind.
The cash balance plan would allow workers to see the value of their retirement savings as they accumulate and it would be run by the California Public Employees’ Retirement System or another contracted organization, according to the PRC. Employees would contribute 3 percent of earnings through payroll deduction, managed by their employer. Employers would have no fiduciary liability as part of the plan, they would just be responsible for allowing their employees to set aside money through payroll deduction for the plan. According to the Pension Rights Center, the Assembly is now considering the bill.
In Connecticut, the General Assembly considered legislation to establish a task force to study the development of a state-administered retirement plan for small businesses and other employers that can’t afford to run their own plan. The bill passed the House of Representatives, but the legislative session ran out before the Senate could consider the proposal. It will be reintroduced in 2013.
Massachusetts passed a bill in March that allows the state treasurer to sponsor a retirement savings plan for workers at small nonprofits in the Commonwealth. The retirement plan would be a tax-qualified defined contribution arrangement with various investment options available to employees. Workers and employers can make contributions to the plan, and it would be marketed to nonprofits with 20 or fewer employees.
Also in March, the New York City Comptroller launched a campaign for a pension plan for private-sector workers that would be managed by New York City. The New York City Personal Retirement Accounts plan would pool worker and employer contributions into a professionally managed retirement fund. It would target small and mid-size companies that don’t offer retirement plans to their workers. This plan is similar to the one being proposed in California, according to the PRC.