Don't look now but a state government near you, perhaps your own, may be thinking about getting into the retirement plan business; competing against you to offer plans to private-sector workers.
Possibly spurred by a 2012 law in California to study creation of a state-run retirement plan focused on the private-sector, proposals were introduced this year in six states — Maine, Maryland, Illinois, Indiana, Oregon, and Connecticut — that would require employers who currently do not offer a retirement plan to adopt one run by the state government.
While the details differ in each state, the government-run plans would either directly compete against financial professionals or cut you out of the picture altogether.
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Proponents of these plans argue that the retirement savings shortfall is caused by a lack of access to low-cost retirement plan options. Financial professionals know this isn't true.
There are plenty of low-cost retirement plan options available in the marketplace today. And the reasons for low savings have more to do with economic conditions than availability of a plan. The latest Employee Benefit Research Institute Retirement Confidence Survey found that immediate worries about job certainty, daily expenses and debt are taking precedence over saving for the future.
Taxpayers would pay
When states like Maryland, Tennessee and Washington have studied the concept of states running plans for the private sector, they've discovered there are significant costs to starting and operating such plans. Costs that would ultimately be paid by tax payers.
Left out of the debate is the important role of financial professionals in helping employers select and design retirement plans for their employee demographic. You know the valuable services you provide to plan sponsors and participants in the quest to improve retirement readiness. But lawmakers may not.
While the proposals failed to advance in several states, they are alive and moving forward in Connecticut and Oregon. Whether you live in those states or not, this issue should be of concern. More and more states are considering private-sector plans each year. And if more states pass legislation — even if just to study the idea — it could have a ripple effect.
Now would be the time to take action to educate legislators about the invaluable role you play and that they could have a greater impact on retirement savings by improving economic conditions than by putting you out of business.
Let them know that you add value, catering to individualized needs. States cannot do that.
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