State Claims ‘Crisis’ to Argue For Government-Backed 401k Plans
One state is upping the rhetoric to call for government-sponsored 401k retirement plans. Iowa State Treasurer Michael Fitzgerald claims it’s facing a retirement savings crisis.
He’s using it to justify a push for legislation that would require businesses that do not offer a 401k or similar defined contribution plan to participate in the Iowa Retirement Savings Plan Trust.
The Des Moines Register reports Fitzgerald has “filed a bill for consideration in the Iowa Legislature’s 2017 session …The program’s trustee would be the state’s treasurer, but all investments would be made solely by a private firm’s employees.”
“The state will not be putting any money into it,” Fitzgerald said. “This would not be the state funding anybody’s retirement.”
However, the program would require a state appropriation for startup costs and management expenses.
“The goal would be to remove many of the complexities and costs small business owners face when setting up and maintaining retirement plans, making it easier for their workers to access a retirement account,” Fitzgerald told the paper.
Four in 10 workers lack access to an employer-sponsored 401k retirement plan and half of all workers do not participate in one, according to a 2016 report by the Pew Charitable Trusts.
In addition to Iowa, this lack of access has been an impetus for several states, including California, Connecticut and Illinois, to introduce or enact legislation mandating that employers meeting certain criteria offer 401k retirement plans or otherwise enable workers to enroll in a state-sponsored plan when implemented.
Still other states, like New York and Massachusetts, are debating the issue in what could be the start of an accelerating trend.
The plans are not without critics.
“While there has been a fair amount of publicity about the creation of state programs, it remains to be seen how robust and comprehensive state educational, enrollment or investment support programs will be for state-sponsored retirement savings programs,” according to Tom Foster, Assistant Vice President of Strategic Relationships with MassMutual.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of 401(k) Specialist and 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. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.
