Connecticut has become the latest state to take its next step in joining the movement to offer the estimated 42 percent of workers (about 55 million people) without access to employer-provided retirement plans a means to save for retirement.
The Trump administration may have reversed Obama-era rules allowing states and municipalities to launch their own retirement plans for workers who have no access to such plans at work, but that doesn’t mean that the issue is dead. Not by a long shot.
In fact, while 30 states are considering retirement plans for small business employees, eight states are already going ahead with plans to provide workers with a means to save for retirement that doesn’t depend on their employers.
Oregon has already launched its plan, and others are following in its train.
There’s variation from state to state, of course, on types and rules of plans—one of the objections of opponents to state- and municipal-run plans is that allowing them would result in a “patchwork” of plans instead of a uniform system to save for retirement—but since the Trump administration also killed the myRA, which was a national program, people need some way to save for retirement when their employers don’t offer them the option.
And a number of states are pursuing their own plans to provide them with just that.
Courtesy of the Pension Rights Center, AARP, and other sources, here’s a look at some of the states that are proceeding with efforts to create retirement savings plans for their workers in spite of headwinds, political and otherwise.
As you’ll see, some states have gotten a lot farther down the road than others—remember, 30 states altogether either have explored or are exploring launching their own plans—but states’ concerns over how they’ll deal with retirees who have no funds to rely on is pushing a number of them to act.
Others may find the political will as time passes if Washington continues to remain a stumbling block. Here are the eight:
Washington’s Small Business Retirement Marketplace is a virtual marketplace where qualified financial services firms offer low-cost retirement savings plans to businesses with less than 100 employees, including sole proprietors and self-employed individuals.
The Marketplace was established effective July 24, 2015.
After a delay in gathering enough members, Connecticut’s Retirement Security Authority met for the first time this week to set up a new payroll deduction savings plan for as many as 600,000 state residents who do not have traditional plans.
While the state comptroller believes the setup procedure could take as long as a year, state residents could begin registering for retirement savings accounts by 2019 or 2020.
The Connecticut Retirement Security Exchange requires covered employers to automatically enroll their employees into a Roth IRA arrangement.
Private employers with five or more employees who received at least $5000 in wages during the previous year, who have been in business for at least one year and who do not offer a qualified retirement plan are required to participate; employers with fewer than five employees may participate voluntarily but their employees are not required to enroll in the exchange.
In 2012, Governor Jerry Brown signed S.B. 1234, the California Secure Choice Retirement Savings Trust Act, into law.
The law requires that all businesses with five or more employees that do not already offer a retirement plan enroll their workers in a new type of savings plan based on IRAs.
Additional actions established the California Secure Choice Retirement Savings Investment Board and the California Secure Choice Retirement Savings Trust, and in March of last year, the Board approved the program and laid out recommendations for implementation.
The California Security Choice Retirement Program was signed into law by Governor Brown on September 29, 2016 and went into effect on January 1.
The Illinois Secure Choice Savings Program was signed into law by Governor Pat Quinn on January 4, 2015.
It establishes a payroll-deduction IRA for workers whose employers do not offer any other retirement savings vehicle. The law requires all businesses in existence for at least two years with 25 or more employees to automatically enroll their employees in the Secure Choice Savings Program unless they offer another retirement option to their workers.
The law is to be implemented within 24 months unless enough funds are not made available for the project.
The Board must also find that the program is self-sustaining, that it is eligible for favorable federal tax treatment, and that it is not subject to the Employee Retirement Income Security Act of 1974 (ERISA).
On May 10, 2016, Governor Lawrence Hogan signed into law HB 1378, a law establishing the Maryland Small Business Retirement Savings Program and Trust.
The new law went into effect on July 1, 2016.It establishes a retirement savings program for employees working for companies who do not offer another qualified retirement program. The law creates an 11 member Board (with a four-year term) and gives it the authority to design the new retirement program.
In March 2012, Massachusetts enacted HR 3754, an Act Providing Retirement Options for Nonprofit Organizations.
The new law allows the state treasurer to sponsor a retirement savings plan for workers at small nonprofit organizations in the Commonwealth.
Participation by the organizations is voluntary. The retirement plan would be a tax-qualified defined contribution arrangement with various investment options available to employees. Contributions could be made by workers, their employers, or both.
2. New Jersey
The New Jersey Small Business Retirement Marketplace Act was enacted on January 11, 2016, and took effect immediately upon enactment.
It is modeled after the Washington State Small Business Marketplace Retirement Savings Bill and creates a virtual marketplace for small businesses in New Jersey to shop for private retirement plans for their employees.
The new portal will be available to businesses with up to 100 employees and is voluntary for both employers and their workers.
The Oregon Retirement Savings Plan was signed into law on June 23, 2015.
It created a retirement savings board to develop a defined contribution retirement plan for employed Oregonians whose employers do not offer retirement plans.
Oregon’s plan, an auto-IRA, has already launched and is in its pilot phase. It will bring in larger employers in 2018 and is expected to be online for all employers by 2020.