People like the idea of state-run retirement plans for private sector workers who lack coverage, but their confidence in government to manage them properly is another matter.
LIMRA recently found that, in theory, “many workers support the notion of government-mandated retirement savings, but their confidence in the ability of governmental entities to administer such programs is lower than in any other listed entity.”
When it comes to plans sponsors and their views on dropping their own plans in favor of a government solution, opinions run about 50-50.
“Many employers say that they would be very likely to discontinue their defined contribution plan in favor of a government solution, but just as many say that they would not be very likely to do so,” according to LIMRA.
The organization adds that sponsor fear of plan lawsuits “is [highly] correlated to willingness to discontinue a DC plan in favor of a state solution.”
“Sponsors who place higher importance on retirement readiness and participant outcomes are more likely to express the willingness to commit to their DC plan.”
Sponsors willing to forego a DC plan for a state solution may not have thought the decision through or made a thorough comparison of their options, LIMRA concludes, which provide an opportunity for plan providers and advisors to add value to their business clients.
Congress and the Trump Administration have blocked state and city-sponsored IRAS and 401ks recently, but some states are moving ahead with their own plans anyway.
California, Vermont and Oregon, among others, ignored Congressional action and forged ahead s, banking on favorable court challenges to what they see as federal overreach.
Oregon is the most recent. Backers of the Beaver State initiative launched OregonSaves, a Roth IRA, on July 1.
Passed by the 2015 legislature to address what it sees as inadequate savings, the Oregon retirement plan is available to those Oregonians who do not have access to a retirement savings option, such as a 401k plan, at work.
“In the face of a multitrillion-dollar retirement savings crisis, Congress chose to side with the special interests over working Americans,” Oregon Treasurer Tobias Read said at the time of the repeal. “Sadly, this attempt to attack state-based retirement plans and the financial security of workers is exactly what we have come to expect from Washington D.C.”
Calling it another example of the “short-term thinking coming out of Congressional Republicans and the Trump Administration lately,” he added that Congress should be spending its time finding ways to help American families save for retirement, “not erecting barriers.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
