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Washington State May Create Product Clearinghouse for Small Plans

Add Washington to the list of states that are considering legislation affecting the marketplace for private retirement plan products. State Rep. Larry Springer (D-Kirkland) has introduced a bill to create a “small business retirement plan marketplace” with the goal of “removing barriers to entry into the retirement market for small businesses.” 





The legislation would create a retirement plan product clearinghouse that would only be available to Washington employers with fewer than 100 employees, self-employed individuals and sole proprietors that do business in the state — and would dictate the types of products and investment options that could be offered in the clearinghouse. For instance, the marketplace must approve at least three types of plans for eligible employers participating in the marketplace to use: a SIMPLE IRA plan, a payroll deduction IRA program and a MyRA (President Obama’s new Roth IRA program). 





As for the investment product options within the SIMPLE or payroll deduction IRA plans, the legislation suggests that the arrangements include at least two target date fund options and two balanced fund options. (The sole investment option in the MyRA is a bond backed by the U.S. Treasury.) 





Participation in this new clearinghouse would be completely voluntary on the part of both the product providers and eligible Washington employers. However, the legislation would require the director of the clearinghouse to develop marketing materials about the clearinghouse and its products to be distributed through various Washington state government entities. The bill envisions state-appropriated funds and program fees to be used for this purpose. 





Rep. Springer seems to be under the impression that a distribution channel for retirement plan products for small businesses does not currently exist in the marketplace, and so the Washington state government needs to create one. But by not explicitly including 401(k)s or other qualified employer-sponsored arrangements other than SIMPLE plans in the clearinghouse, the bill needlessly limits the private retirement product options in the marketplace that are currently available to small employers in Washington. 




Andrew Remo is the Congressional Affairs Manager for NAPA and ASPPA.

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