More states aren't waiting for federal policymakers to act and instead are developing their own solutions for private-sector workers whose employers don't offer retirement plans, state and industry officials said. Federal inaction on retirement savings policy is prompting more states to come up with their own solutions, said panelists discussing new developments in defined contribution plans.
Calling it “a crisis of unpreparedness for retirement,” Illinois state Sen. Daniel Biss talked about his state's new law, signed in January, that creates the Illinois Secure Choice Savings Program. Unless an employee opts out, the program requires employers to automatically deduct 3% of a worker's paycheck into a Roth IRA.
In 2014, Connecticut created the Connecticut Retirement Security Board to study and develop a statewide a plan open to private-sector workers who aren't covered by employer-sponsored plans.
A 2013 study found 40% of employed state residents between the ages of 25 and 64 didn't have access to an employer-sponsored retirement plan.
Comptroller Kevin Lembo, who co-chairs the board, said employers “must be engaged in the design and implementation processes to ensure their support and reduce any burdens placed on them by the program.”
While some states continue to work on expanding retirement savings among private-sector employees, more states are making changes to defined benefit plans for public-sector workers, particularly for new employees, said Joshua Franzel, vice president of research for the Center for State and Local Government Excellence, a non-partisan research organization in Washington.
Changes such as increased vesting periods, reduced benefits, increased eligibility requirements and changes in plan design have had a greater impact on new employees, Mr. Franzel said, while current workers are most impacted by increased contribution rates, and retirees have been hit hardest by reduced cost-of-living allowances.
