The concept of states setting up retirement programs for private-sector workers is gaining traction, with help from the Department of Labor and policymakers in an increasing number of states.
Maryland became the latest state on Sept. 15, when legislative leaders announced a retirement security and savings commission that will develop a retirement savings program. New Jersey could be next, with supporters pushing for passage this year of a bill creating voluntary accounts for workers without employer-provided plans.
A turning point came Sept. 3, when the Labor Department drafted proposed rules to guide states as they set up workplace-based retirement programs. While many states once kept a nervous eye on the DOL, those fears eased considerably in July when President Barack Obama promised further guidance by the end of 2015.
DOL officials reinforced their willingness to help states with proposed rules on setting up auto-enrollment individual retirement account savings programs for private-sector employees. The key feature would be contributions via payroll deductions so that employers are not subject to the Employee Retirement Income Security Act.
Approval of the DOL proposal from the Office of Management and Budget also should clarify the timeline for final rules. Next up for DOL officials is separate guidance to help states create retirement plans that would be covered, but not pre-empted, by ERISA. Such guidance could signal a wider opportunity for other defined contribution approaches, such as multiple-employer plans.
Anticipated DOL regulations “will play a vital role in whether or not we will be able to move forward with our program in California,” said Christina Elliott, acting director of the state's Secure Choice program, which plans to automatically enroll workers who don't have a workplace plan into an IRA that is pooled and professionally managed. The statute that created the program “is very clear that if the program is subject to ERISA, then it shall not be implemented. If we cannot mandate participation at some level, and if we cannot auto-enroll participants, we have essentially been stripped of the ability to move the needle on the retirement crisis in California,” said Ms. Elliott.