Despite their differences, there’s at least one thing that all of the stakeholders in our retirement system agree on: average American workers are not saving enough for retirement. In Washington, however, “When we raise ideas to address income adequacy,” says NAPA/ASPPA executive director Brian Graff, “we are commonly met with this retort: ‘Why should we focus on adequacy when half of working Americans don’t have a retirement plan in the first place?’ That’s a reasonable point. It’s also a driving force behind those who argue that the government, including state governments, should take things over.” Graff addressed this dynamic in his “Inside the Beltway” column in the latest issue of NAPA Net the Magazine.
When NAPA and ASPPA engages with legislators on that issue, Graff notes, “there are four overriding principles we stand for.” They are:
• In order to address the small business retirement plan distribution problem, the cornerstone of any state legislation must require employers above a certain size (typically at least five employees) to offer some type of retirement savings program to employees.
• Any qualified plan (such as a 401(k) plan) or payroll deduction IRA offered by any private sector vendor must be allowed to satisfy the employer mandate.
• While we do not believe that a state-sponsored retirement program option is necessary, if legislators choose to create a state default option (e.g., California), then it must be an IRA-based program exempt from ERISA.
• If there is a default state program, the state should sponsor a website that includes private-sector vendors so that the state program is presented to small businesses alongside private-sector products in order to achieve a level and competitive playing field.
“We believe that if these principles are followed, dramatic gains can be achieved in closing the existing retirement plan coverage gap among American workers. Ultimately, that should be everyone’s shared goal,” Graff declares.
