The financial services industry has been, for the moment, sated by President Trump’s moves to roll back the game-changing DOL fiduciary rule. Now, it’s time to turn its attention to another contentious issue: state-run retirement plans.
For savers, these plans – offered in just a handful of states – are a sweet deal because they automatically enroll workers in plans at companies that don’t currently provide retirement benefits. The automatic IRA deductions are set up at no cost to employees, who are free to opt out.
Financial advisors, however, aren’t so enthused, arguing that a patchwork of state – and, in some cases, city – plans will create confusion and unduly burden employers and plan administrators.
Not surprisingly, state-run plans are a huge hit with state officials who are concerned that less than one-third of Americans aged 65 to 74 have savings in a retirement account — and that those with money saved only have an average balance of $49,000. California officials estimate that 7 million people could be eligible for that state’s plans — and, as such, are worried about Congressional efforts to scrap the federal rules that made them possible.
“I’m disheartened,” said California State Senate Leader Kevin DeLeon in an interview with NPR. “I can’t say I’m shocked, because Wall Street has been gunning to undo these regulations for a very long time. And now, with the Trump administration, they see their golden opportunity.”
Sen. Orrin Hatch introduced two resolutions to this end: S.J.Res. 32 and S.J.Res. 33, both of which would undo the DOL regulation issued in the waning days of the Obama administration that made it easier for states to craft retirement plans. Two companion resolutions are pending in the House of Representatives.
When the DOL passed that rule last year, some predicted it would open the floodgates for similar efforts. They were right. In addition to California, Connecticut, Illinois, Maryland and Oregon are in various stages of developing so-called ”auto-IRA” plans. The idea is currently under review in Vermont, Minnesota, Virginia, Utah and West Virginia, and has been discussed in Colorado, Delaware, Indiana, Kentucky, Maine, Montana, New York, Rhode Island and Wisconsin, among others.