Inclusion of the pilot program in the $4 trillion federal budget proposal — released Feb. 2 and now awaiting congressional action — is raising the hopes of retirement security advocates pushing states to take the lead.
“We are encouraged by this signal that the administration values efforts to expand retirement savings opportunities in the states, and is identifying appropriate avenues to support those efforts,” said Cristina Martin-Firvida, AARP director of financial security and consumer affairs in Washington.
“I think this is a positive sign, and I think there's going to be activity,” said Karen Friedman, executive vice president and policy director at the Pension Rights Center in Washington.
It was also welcome news to policymakers in states like Oregon, where Treasurer Ted Wheeler and others are hoping for passage of legislation implementing recommendations from a retirement security task force.
The task force is calling for a defined contribution plan with automatic enrollment and auto escalation, no required employer contribution and pooled professional investment management.
Oregon and other states considering new retirement plan options are proceeding cautiously to avoid triggering potential conflicts with ERISA, which could leave taxpayers or even employers vulnerable to litigation.
The flip side of avoiding ERISA is that states have to build their own protections for participants.
“A lot of states have wrestled, will wrestle with the ERISA issue,” said Michael Cox, a spokesman for Mr. Wheeler.
“The fact they want to set aside some money for this is a good thing.”
As at least 20 states consider similar approaches but worry whether ERISA will apply, “that question is out there,” said Eric Keener, partner and chief actuary with Aon Hewitt in Norwalk, Conn. He sees the White House proposal advancing the cause for several reasons. “It could matter from the standpoint of whether an employer wants to maintain a plan, or the state might be concerned about fiduciary liability for taxpayers. From the employers' perspective, if it is not (covered by) ERISA, that would be a positive. It's somewhat of a balancing act,” said Mr. Keener.