Is Colorado the next state to create a retirement savings plan for private-sector workers who don’t have access to a 401k?
More than two-thirds of Colorado voters support the idea, according to a new survey.
The results of the poll, first reported by The Denver Post, come on the heels of Governor Jared Polis’ appointment of eight people to a panel to help study how Colorado could join the ranks of states that are establishing these types of programs. The new study group was created by the Colorado General Assembly earlier this year, according to the paper.
Of the 600 registered voters surveyed, 69% said they were in favor of creating a plan, with a 4% percent margin of error.
Notably, 35% “strongly supported” the idea while 6% “strongly opposed” the idea. Eighteen percent said they were not sure.
Democrats were most supportive, with 80% favoring the idea compared to 62% of Republicans. Broken down further, 82% of liberals, 73% of moderates and 56% of conservatives indicated support.
It also had the support of 70% of those already with an IRA, 401k, or similar retirement account, as well as 66% of those with a pension plan or another kind of savings/investment.
State Innovation Exchange (SiX), which commissioned the poll conducted by Strategies 360, identifies itself as “a national resource and strategy center that supports state legislators in advancing and defending progressive policies across the country.”
SiX released the following statement about the poll and the idea:
“With nearly a quarter of respondents reporting that they have no retirement plan, a state-wide program has obvious appeal. Additionally, there remains intense support for the program even for those with an existing retirement plan. In the 21st century, Colorado workers understand the value of a retirement plan that moves with an individual from job to job.”
The state will face “a retirement crisis” if it doesn’t act, Democrat State Senator Brittany Pettersen told The Denver Post. The Democrat from the Denver suburb of Lakewood sponsored the legislation creating a board to make recommendations on how the state should move forward.
“We have a new sharing economy, and these folks don’t have retirement options. It will be a statewide burden if we don’t work on it together,” Pettersen said.
Many states further down road
While only a handful of states have implemented retirement savings plans for residents without access to a plan from their employer, more than 40 states have studied, considered, or adopted legislation for state-facilitated savings programs, according to the National Conference of State Legislatures.
Behavioral economics plays into it, as states are trying to head off having to take care of poverty-stricken retirees in the future by auto-enrolling them in retirement savings plans now.
Studies have shown only one in 20 workers will open an account on their own, but those who do have access to retirement options where they work are 15 times more likely to begin and continue saving.
Critics of state-run programs, including the Investment Company Institute, say they are costly compared to private plans, lack ERISA protections, and are likely to make smaller employers drop their more effective 401k plans and SIMPLE IRAs in favor of the state option.
Proponents say the programs don’t vary much state to state and could spur greater use of 401k plans as employers will be mandated to offer some sort of workplace retirement plan, be it be a state-run auto-IRA or a 401k-type plan.
Oregon became the first state to automatically enroll workers without access to a 401k or similar plan into an individual retirement account when it launched the program, OregonSaves, in July 2017.
CalSavers, California’s automatically enrolled, state-run retirement plan meant to help over seven million Californians without access to a workplace retirement, officially launched on July 1, and is projected to be one of the largest U.S. retirement programs to date.
By law, every California employer with five or more California-based employees who doesn’t already offer an employer-sponsored retirement plan will eventually have to begin offering a retirement savings program, either through the private market or by facilitating employee access to CalSavers.
Connecticut, Illinois, Maryland, New Jersey are among states with similar state-run auto-IRA programs, currently open or set to open.
Pennsylvania is expected to propose legislation regarding the creation of a state-run IRA program this fall. The proposal would likely require employers with more than 10 employees who don’t already offer a retirement plan to enroll their employees in the state-run plan.