In addition to helping workers save, could state-sponsored retirement plans reduce reliance on food stamps, Medicaid and other publicly funded resources?
It’s one of the benefits pitched by public officials with Illinois Secure Choice, which launched its pilot program last week. The Prairie State hopes it will eventually help shrink (in part) ballooning deficits, as more people take responsibility for their own retirement saving and lessen dependency on state services.
We’ve previously detailed Illinois’ pension pandemonium and Springfield’s effort to avoid any sort of reckoning. The state’s pension debt hit a whopping $130 billion in 2016, up 17 percent from 2015, earning it the title of “America’s most messed up state,” according to CNN/Money.
While many blame profligate government spending overall for the Land of Lincoln’s financial ills, pension debt is nonetheless said to be a major cause.
So, as usual, they’ll look to the private sector to help bail them out (paging Alexandria Ocasio-Cortez).
“About 1.2 million Illinois residents will have money automatically deducted from their paychecks for a retirement savings plan through a new state program being phased in 3½ years after becoming law,” the Chicago Daily Herald reported Sunday.
Similar to OregonSaves, which just celebrated its first anniversary, as well as other states with programs in the works, Illinois Secure Choice is a “convenient, low-cost retirement savings program for employers who do not already offer a plan.”
At least it looks good on paper. There are no fees for employers to facilitate the program, employers cannot make contributions and employers serve a limited role as a facilitator.
The Illinois Secure Choice account is a Roth IRA with a default savings rate that is 5 percent of gross pay. Employees will be automatically enrolled after 30 days and will begin saving through payroll contributions. They can opt out at any time.
The Herald quotes Woodstock Institute, a Chicago-based nonprofit, in noting that roughly 2.5 million private sector workers in Illinois did not have access to an employment-based retirement plan in 2010.
And as with Oregon, Ascensus was selected by Illinois to manage its program. Having previously worked with state governments on the 529 college planning portion of its business—and having the infrastructure in place—the company now says it’s in prime position to capitalize on the trend toward state-sponsored plans.
Ultimately, we’re all for more covered workers, but given Illinois’ fiscal track record, our 401k skepticism could be forgiven.