The last time millions of Americans were signed up for a new government-mandated benefit program, it didn’t go so well. The initial rollout of the Affordable Care Act, or Obamacare, resulted in broken websites, angry employers, and lots of confused consumers.
Now five states, where one in five Americans lives, are attempting a similar feat, this time with retirement. The goal in California, Oregon, Illinois, Maryland, and Connecticut over the next few years is to give nearly every worker the chance to save for retirement at work.
Currently, 36 percent of U.S. private-sector workers don’t have access to a pension or 401(k)-style plan on the job, according to the Pew Charitable Trusts. Even those who have a plan at work don’t always find it easy to sign up. As a result, 55 percent of workers aren’t saving for retirement at work. Young workers and Latinos are the least likely to have access to workplace retirement options.
The states are trying to get more workers saving for retirement by requiring employers either to offer a plan to workers or to connect them to a portable, state-run retirement option.
“It is an ambitious step that is part of a growing national movement aimed at protecting millions of Americans who are on track to retire into poverty,” California State Controller Betty Yee said in a speech earlier this month.
Almost 7 million people could end up enrolled in the California Secure Choice Retirement Savings Program, the state estimates. All employers with five or more workers would eventually need to comply.
It won’t be easy to set up such a program, Yee and other state officials acknowledge. “Other states will be watching closely,” Yee said, “and we are going to succeed. I’m confident of that.”
Legislators in dozens of states have explored ideas for improving workers’ retirement options. The five states that have enacted employer mandates have the support of unions, the AARP, and the Obama administration.
And Americans seem to like the idea. Nearly 80 percent of U.S. workers believe employers should be required to offer retirement plans, according to a survey of 951 Americans by Natixis Global Management released Nov. 21. Almost three-quarters of workers said employers should be required to provide matching contributions, something not required in any of the five states.
It’s no coincidence that all five of the states preparing retirement mandates are heavily Democratic. Business and financial industry groups, which usually support Republicans on such issues, aren’t nearly as enthusiastic about the proposals. The Investment Company Institute, a trade group for fund companies, opposed the California plan, saying it opened up the state to legal and financial risks. The California Chamber of Commerce initially opposed Secure Choice as well.