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States aren’t waiting for Washington to offer workers retirement security

August 16, 2019

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States are offering retirement savings plans to small- and medium-sized employers in the private sector. But do these state initiatives offer enough help? (Photo via Pexels.com)

Let’s start with the good news about retirement savings security. 

According to the report released on March 29, 2019 by the Government Accountability Office (GAO), more U.S. workers are saving for retirement. The GAO report, which based its findings on the Federal Reserve Board’s 2017 Survey of Consumer Finances, found that the number of households headed by someone 55 and overwithout retirement savings decreased from 52 percent in 2013 to 48 percent in 2016. 

Yet despite those gains, almost half of U.S. workers still lack retirement security. A sobering one-third of older workers 55 to 64 years old don’t have any retirement savings at all, while those with retirement savings have a median balance of $92,000, or $300 a month. 

That’s why more states are offering savings plans to small- and medium-sized employers in the private sector that don’t offer any retirement plans to their employees. But do these state initiatives offer enough help? And do they compete with private-market initiatives such as Individual Retirement Accounts (IRAs)?

Those are some of the questions for business reporters to delve into by looking into one or more of these angles:

Why are states sponsoring retirement savings plans?

Because 55 million workers without access to a retirement plan of any kind at work, who work in jobs for small- and medium-sized employers in the private sector; 58 million if you count part-time workers, according to the Pension Right Center. AARP says 30 states are considering taking action, and 10 have enacted legislation. (In addition, one city, Seattle, is offering its own plan.) 

Participation, however, is mandatory in only about half of the states on AARP’s list, which raises the question of how effective these plans can be. What is your state offering, and why?

Can state-sponsored retirement plans be effective?

The National Association of Insurance and Financial Advisors (NAIFA) doesn’t think so.State-sponsored plans allow lower contribution limits, which won’t help workers save enough money for retirement. These plans may tempt employers with existing 401(k) or other retirement plans to drop their plans, says NAIFA. Plans also compete with existing private-market plans such as a low-cost IRA. Contact the state representative responsible for administering these plans and employers of varying sizes who are considering, or have one of these plans in place.   

Further resources:

Retirement Security: Federal Action Could Help State Efforts to Expand Private Sector Coverage, The Government Accountability Office.      

State-Based Retirement Plans in the Private Sector,Pension Rights Center.

State Retirement Savings Resource Center,AARP.

State Sponsored Retirement Savings Plans for Non-Public Employees, National Conference of State Legislatures.


  • Dorianne Perrucci

    Since 2001, Dorianne's freelance bylines have appeared in leading print and digital news outlets, including The New York Times, Newsweek, The Wall Street Journal, TheStreet.com, The Star-Ledger and NJ Biz. During the financial crisis of 2007-2009, Do...

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