State Sponsored Retirement Plans: Studies in Progress

The Issue
States are seeing an increase in legislation that would establish state-run retirement plans for private sector workers. If enacted and implemented, these plans would directly compete with existing private market programs that already offer consumers a robust variety of retirement options including 401(k), 403(b), 401(a), 457(b) plans and various IRA options.
 
Background
In recent years media and policymaker attention has focused on the fact that a large percentage of workers are not saving nearly enough for retirement. Due to the belief that there exist significant gaps in employee access to employer-based retirement plans, many states have seen bills introduced which would implement state-run retirement plans designed to make retirement savings options available to workers at small and medium sized companies.
 
NAIFA Position
NAIFA understands the importance of retirement security and acknowledges that many Americans are not saving enough for retirement. However, NAIFA does not believe that competition by a state-run retirement plan is the answer. Availability and access to retirement savings options are not the problem— there already exists a strong, vibrant private sector retirement plan market that offers diverse, affordable options to consumers. Nearly 80% of full-time workers have access to a retirement plan through their employer, and more than 80% of workers with access to plans in the workplace participate in a plan. In light of limited state resources, the need to use state funds for plan start-up and operating costs and potential state responsibilities and obligations under ERISA, NAIFA believes that states would be better served by using state resources to educate their citizens about the importance of saving for retirement rather than implementing their own costly state-run plan.
 
Current Status
In recent years 14 states have considered legislation that would establish a state-run retirement plan. Massachusetts is the only state that has enacted legislation establishing a program; the Massachusetts plan is narrowly limited to non-profit organizations with less than 20 employees and has not become operational. No other state has enacted legislation establishing a state run retirement plan.
 
The following seven states have appointed task forces or commissions to study the feasibility of a state run retirement plan: California; Connecticut; Maryland; Minnesota; Oregon; Vermont; West Virginia.

These task forces and commissions are currently holding meetings and are under various deadlines for reporting their findings to the state legislature. NAIFA state associations are monitoring and participating in these meetings to the extent permitted.