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Washington State May Create a Public Retirement Savings Program

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Washington state could set up a government-sponsored retirement savings plan to private-sector workers.

State lawmakers are considering S.B. 5740, a bill that would create a Secure Choice Retirement Savings program.

S.B. 5740 was introduced in January. The state Senate passed it by a 31-17 vote March 8.

The House Committee on Consumer Protection and Business held a public hearing on the bill last week. The committee has scheduled an executive session on the bill for Tuesday.

The History

More than 20 states have discussed the possibility of sponsoring a state-run retirement plan for workers without access to an employer-sponsored retirement plan.

Oregon has already set up a state-sponsored retirement program, and California is preparing to do so. Organizers say the programs will boost the retirement savings of workers who don’t have access to an employer-sponsored 401(k) plan or other employer-sponsored retirement plan.

(Related: Public-Sector Retirement Savers Could Use a Nudge, Too: Study)

Some financial services groups, such as the National Association of Insurance and Financial Advisors (NAIFA), oppose the public retirement programs. Those groups say that state-run plans are costly, and the consumers without employer-sponsored retirement plans would be better off investing in private-market savings options, rather than contributing the government-run programs.

What Oregon Did

Oregon launched OregonSaves in 2017.

The program, which enrolls workers automatically in individual retirement accounts, has signed up roughly 1,800 employers.

As of December 2018, the auto-IRA program had collected about 22,000 individual employee contributions, for a total of about $10 million, from about 600 employers, according to the Center for Retirement Research at Boston College.

Employees in Oregon can opt out of the program. Employees that opt in automatically direct 5% of their pay into the retirement savings plan. That percentage is set to increase by 1 percentage point each year, until the employee’s contribution rate hits 10%.

What California Is Doing

California is running a CalSavers pilot project now and says it will launch the program statewide July 1.

California will require employers with five or more employees to offer some type of retirement savings plan, such as a 401(k) plan, an employer-sponsored IRA arrangement, another commercial investment vehicle, or the CalSavers program.

For workers, participation will be voluntary.

The maximum CalSavers contribution will be $6,000 per year for a worker under 50, and $7,000 per year for a worker ages 50 or older.

What Washington State Might Do

S.B. 5740 calls for Washington state’s Department of Commerce to run the proposed Secure Choice Retirement program.

The commerce director could set up a pilot program version as early as Jan. 1, 2020.

The commerce director would select the program IRA menu, and set the participant contribution rate.

An affected employer without its own retirement plan would have to let employees contribute to a Secure Choice program auto-IRA through a compensation withholding arrangement.

For workers, participation would be voluntary.

What This Means for Agents

The Washington state program and similar programs could hurt agents who sell annuity-based and life insurance-based income planning products, by increasing the percentage of workers who save for retirement at work.

The programs could also create opportunities, by making employers and workers hungry to hear information about the new public programs, and discussions of private-market alternatives to the public programs.


Information about S.B. 5740 is available here.

Corrections: An earlier version of this article gave the incorrect CalSavers launch date and incomplete description of the annual maximum contribution. The program will launch statewide July 1. The maximum contribution is $6,000 for participants under age 50 and $7,000 for participants ages 50 and older.

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