3 years 6 months ago
But we already have a Federal sponsored retirement plan: It is called an IRA (Individual Retirement Account). What a waist of state resources and time.
The ERISA consultants at the Retirement Learning Center Resource 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 plans. 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 Oct. 6, 2020, 12 states have enacted laws creating retirement savings programs for private-sector workers.[1] The following represents a high-level overview of the various plans.
|
State |
Plan Name |
Type of Plan |
|
Automatic Roth IRA |
|
|
Automatic Traditional IRA |
|
|
Automatic Traditional or Roth IRA |
|
|
Automatic Roth IRA |
|
|
Automatic Traditional IRA |
|
|
Massachusetts Defined Contribution CORE Plan
|
Multiple employer plan that is a pre-tax and post-tax 401(k) savings plan developed for employees of eligible small nonprofit organizations |
|
New Jersey Small Business Retirement Marketplace
|
Marketplace for diverse retirement plans, including life insurance plans, SIMPLE IRAs and payroll-deduction IRAs |
|
The New Mexico Work and Save Act
|
Voluntary Payroll Deduction Roth IRA |
|
Payroll Deduction Roth IRA |
|
|
|
Automatic Roth IRA |
|
Vermont Green Mountain Secure Retirement Plan
|
Multiple employer plan that is a tax-deferred, pre-tax 401(k) savings plan with optional future employer contributions |
|
Washington’s Small Business Retirement Marketplace
|
Marketplace where qualified financial services firms offer low-cost retirement savings plans to businesses and individuals |
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.
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.
Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Consumers should consult with their tax advisor or attorney regarding their specific situation.
©2020, Retirement Learning Center, LLC. Used with permission.
[1]AARP Public Policy Institute, State Retirement Savings Resource Center, October 2020
