Iowa Joins State-Run Retirement Program ‘Club’

Iowa State Treasurer Mike Fitzgerald and state senator Janet Petersen have rolled out a state-run retirement plan proposal.

The pair, both Democrats, say that the proposed “Retirement Savings Iowa” would be run similar to College Savings Iowa, which offers 529 college savings plans. As with several other state-run programs and proposals made to date, Retirement Savings Iowa would not require employer contributions, and employers that already offer a workplace retirement plan would not be subject to the mandate to offer the program, which would auto-enroll workers (who could opt out) via payroll deduction at 3% of pay, according to the Des Moines Register.

As proposed, Iowa’s treasurer would serve as trustee and oversee the program. The legislation calls for $1.5 million from state revenues to establish and manage the fund, though it specifically precludes either the treasurer or the state from guaranteeing a rate of return, and has a provision that says the state is not liable for any participant losses.

Last year neighboring Illinois became the first to adopt a state-based retirement savings program for private sector employees who do not have a retirement plan at work. Similar initiatives are underway in Oregon and California.

Last year Washington State launched a small plan marketplace, an approach recently embraced by New Jersey, and approximately half the states are currently considering measures to close the retirement coverage gap.

At President Obama’s direction, last November the Labor Department unveiled a proposed rule to clarify ERISA’s application to state-run IRA programs, in the process tilting the playing field in favor of those programs in competition with the private sector.

Not that the Iowa program will be in place any time soon. The program must be approved by both the state legislature and signed into law by the governor. Even then, according to Radio Iowa, Fitzgerald told reporters he said he believes the fund could be up and running by July 2017 or possibly July 2018.

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