Some states may have taken the initiative to provide private-sector employees with access to a retirement plan, even if their employers haven’t done so, but that won’t be enough.

Read: 4 views on retirement savings portability

A national retirement plan is a must.

That’s according to a new brief issued by the Center for State and Local Government Excellence.

The brief, which examines the nature of the coverage problem, the initiatives that states have taken to address it, and what the U.S. Department of Labor has done to remove regulatory barriers, comes to the conclusion that while the auto-IRA is the most effective state strategy, a national auto-IRA would be a more efficient way to close the retirement savings gap.

Read: Expert calls White House's multiemployer retirement proposal shortsighted

The brief, written by Alicia H. Munnell, Anek Belbase, and Geoffrey T. Sanzenbacher of the Center for Retirement Research at Boston College, points out that “only about half of private-sector workers are covered by [employer-sponsored retirement]… plans.”

Considering that the percentage of private-sector workers covered by any kind of employer-sponsored plan has not increased since 1979, with the lack of coverage hitting low-income workers particularly hard, the problem of how people will be able to afford to retire is growing.

In addition, the lack of retirement preparedness among workers means that “[t]here is growing evidence that many households, especially those with lower incomes, will have to rely exclusively on Social Security in retirement.”

Munnell previously advocate Congressionally mandated enrollment in a workplace retirement savings plan in testimony before the Senate Finance Committee during a hearing on retirement policy.

Some states, such as California, Oregon, Illinois and Connecticut have put through auto-IRA legislation, with 11 states actively pursuing legislation.

Washington and New Jersey “have adopted a marketplace approach to promote low-cost retirement plans to small employers,” but employer participation is voluntary; seven other states “were unsuccessful” in efforts to pass retirement plan legislation.

While states have stepped in to try to alleviate the problem, that won’t be enough, the brief said.

Not only will more people need financial help to manage retirement, but those solely dependent on Social Security are likely to find those benefits inadequate to provide for their needs.

In addition, the mobility of a workforce that moves in and out of employer-based coverage will mean that those workers end up with “far smaller accumulations than one would expect based on spreadsheet calculations.”

The paper concludes that “a national plan would be a much more efficient way to close the coverage gap, offering substantial economies of scale and avoiding the laborious, time-consuming, and expensive process of setting up 50 different plans.”

Instant Insights /

If state plans can't close the retirement gap, is a national IRA needed?

More From HR Executive

Related Stories

Recommended For You