State-based retirement plans for the private sector
There is a movement afoot to use the efficiencies of public retirement systems to administer new types of pension plans for private-sector workers. Below are brief summaries of the plans being considered:
On September 28, 2012, Governor Jerry Brown signed into law S.B. 1234, California Secure Choice Retirement Savings Trust Act. The bill would eventually require that all businesses with five or more employees that do not already offer a retirement plan enroll them in a new type of savings plan based on Individual Retirement Accounts. What is different is that the new system’s investments would be professionally managed by the California Public Employees' Retirement System or another contracted organization. Employees would contribute about three percent of their wages through payroll deduction, although they could opt out of the plan. A modest benefit would be guaranteed through underwriting by private companies, and not by taxpayers.
Employers could make voluntary contributions into the fund, if this is permitted under federal law. Employers would not have any fiduciary liability involving the fund; their sole requirement is to assist their employees by permitting them to use their payroll-deduction systems to make retirement fund contributions.
In 2012, the Connecticut General Assembly considered legislation to establish a task force to study the development of a state-administered retirement plan for small businesses and other employers that can’t afford to set up plans for their workers. H. 5313 passed the House of Representatives, but the legislative session ran out before the bill could be considered by the Senate. Supporters of the measure plan to re-introduce the legislation in 2013.
In March 2012, Massachusetts enacted H.R. 3754, “An Act providing retirement options for nonprofit organizations.” The new law allows the State Treasurer to sponsor a retirement savings plan for workers at small non-profit organizations in the Commonwealth. The retirement plan would be a tax-qualified defined contribution arrangement with various investment options available to employees. Contributions could be made by workers, their employers, or both. A “not-for-profit defined contribution committee” of five members would be established to assist the State Treasurer in developing policy and providing technical advice for the plan. The plan would be marketed particularly to nonprofits with 20 or fewer employees.
New York City
In March 2012, New York City Comptroller John Liu and the Schwartz Center for Economic Policy Analysis at the New School launched a campaign for a pension plan for private-sector workers that would be managed by New York City. The “New York City Personal Retirement Accounts” plan would pool worker and employer contributions into professionally-managed retirement funds. The plan would target smaller or mid-sized companies that don’t offer retirement plans to their workers. It essentially allows private-sector workers to enroll in a city-managed pension fund and is similar to the proposal being considered in California.
A July 10, 2012, article in the Capital Times noted that State Senator David Hansen is considering a proposal to create a separate pension plan for private-sector workers, using the state's healthy public employee retirement system.
The National Conference of State Legislatures maintains this list of State Sponsored Retirement Savings Plans for Non-Public Employees.
Looking for help with your retirement plan?
If you have a problem with your retirement plan, free help may be available from the U.S. Administration on Aging's network of Pension Counseling and Information Projects. Find help now.
PensionHelp America connects people who need help with their pension, 401(k), and other retirement plans with the pension counseling projects, legal services providers, and government agencies that can help answer their questions. Visit www.pensionhelp.org.
Retirement USA is a national initiative that is working for a new retirement system that, along with Social Security, will provide universal, secure, and adequate income for future retirees. Visit the website.