By Jenny Kiffmeyer, J.D – The Retirement Learning Center
State-sponsored retirement plans for private-sector workers
ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.
A recent call with a financial advisor from Illinois is representative of a common inquiry related to states and retirement plans. The advisor asked: “Which states, if any, have enacted or proposed legislation that would enable them to offer retirement savings programs to private-sector workers?”
Highlights of the Discussion
As of October 6, 2020, 12 states have succeeded in enacting laws creating retirement savings programs for private-sector workers. [1] One city—Seattle, WA—has also enacted an auto IRA program.[2] The following represents a high-level overview of the various plans.
| State/City | Plan Name | Type of Plan |
| 1. California | California Secure Choice Retirement Savings Program | Automatic Roth IRA |
| 2. Colorado | Colorado Secure Savings Program | Automatic Traditional IRA |
| 3. Connecticut | Connecticut Retirement Security Program | Automatic Traditional or Roth IRA |
| 4. Illinois | Illinois Secure Choice Savings Program | Automatic Roth IRA |
| 5. Maryland | Maryland Small Business Retirement Savings Program | Automatic Traditional IRA |
| 6. Massachusetts | Massachusetts Defined Contribution CORE Plan
|
A multiple employer plan that is a pre-tax and post-tax 401(k) savings plan developed for employees of eligible small nonprofit organizations. |
| 7. New Jersey | New Jersey Small Business Retirement Marketplace
|
A marketplace for diverse retirement plans, including, at least, life insurance plans, Savings Incentive Match Plans for Employees (SIMPLE) IRAs and payroll-deduction IRAs. |
| 8. New Mexico | The New Mexico Work and Save Act
|
Voluntary Payroll Deduction Roth IRA |
| 9. New York | New York State Secure Choice Savings Program | Voluntary Payroll Deduction Roth IRA |
| 10. Oregon | OregonSaves
|
Automatic Roth IRA |
| 11. Vermont | Vermont Green Mountain Secure Retirement Plan
|
A multiple employer plan that is a tax-deferred, pre-tax 401(k) savings plan with optional future employer contributions |
| 12. Washington | Washington’s Small Business Retirement Marketplace
|
A marketplace where qualified financial services firms offer low-cost retirement savings plans to businesses and individuals |
| 13. Seattle, WA | Seattle Retirement Savings Plan
|
Automatic Traditional or Roth IRA |
Additionally, another 23 states have introduced legislation on this topic that is still under consideration. Those states include: Arizona, Georgia, Iowa, Indiana, Kentucky, Louisiana, Maine, Michigan, Minnesota, New Hampshire, Nebraska, New York, North Carolina, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia and Wisconsin.
For additional information, please see State-Administered IRA Programs: Overview and Considerations for Congress from the Congressional Research Service.
Conclusion
Concerned with the retirement security of their workers, some state legislatures have enacted laws that create state-sponsored retirement savings plans for private-sector workers. Many other states are considering similar action. The industry can expect more activity in this area in the coming months.
[1] AARP Public Policy Institute, State Retirement Savings Resource Center, October 2020
[2] Chapter 14.36, Seattle Retirement Savings Program
