COLLECTED WISDOM™ on State-Based IRA Retirement Programs

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CIP Rules Hindering State-Run Auto-IRA Program Enrollment

The Customer Identification Program (CIP) rules, established by the USA PATRIOT Act of 2001 to combat financial crime, are obstructing the enrollment of millions of Americans in state-run auto-IRA programs. A brief from the Bipartisan Policy Center highlights that 17 states have enacted auto-IRA legislation to help workers without employer-sponsored retirement plans, with nearly 1 million workers already saving over $1.7 billion across eight states. However, the lack of a common exemption for low-risk accounts under CIP rules is limiting access to these beneficial programs for many potential participants.

Source: 401kspecialistmag.com, November 2024

Will Auto-IRAs Help Households Cope With Emergency Expenses?

The most effective way to save for retirement is through a workplace-based retirement plan, but many workers lack access to one. To help close this gap, many states have adopted programs that require employers without a plan to auto-enroll their workers in an Individual Retirement Account. These accounts use the Roth structure, so workers pay taxes on their contributions up front, allowing them to withdraw contributions at any time without taxes or penalties. Such flexibility may be especially valuable to lower-paid workers, who often lack precautionary savings for emergencies. However, several factors may prevent them from taking money out.

Source: Bc.edu, October 2024

State Auto IRA Policies Have Expanded the Market for Retirement Plans

State-facilitated automatic enrollment Individual Retirement Account programs provide workers with an opportunity to save for retirement through payroll deduction, which is a common and straightforward way to periodically put money aside for long-term financial security. Surprisingly, new evidence also shows that these state programs induce employers to establish their own retirement plans. A new study documents this latter and less expected effect of the state-facilitated retirement savings programs.

Source: Georgetown.edu, October 2024

State-Mandated Auto-IRA Programs: Boosting Retirement Readiness

While traditional 401k plans offer more customization and higher contribution limits, state-mandated Auto-IRA programs provide a valuable option for small businesses and individuals who otherwise would not have access to employer-sponsored retirement plan savings. They offer several benefits for participating employers and employees which are outlined here.

Source: Spconsultants.com, September 2024

What is the Delaware EARNS Program?

The Delaware EARNS program is a state-sponsored program that aims to help Delaware workers save for retirement, especially those who don't have access to employer-sponsored plans. Delaware employers (for-profit and nonprofit) with five or more employees (full or part-time) must register for the program if they don't offer a qualified retirement plan. The program is also available for self-employed individuals.

Source: Belfint.com, August 2024

How Are Employees Responding to State-Run Retirement Plans?

There is research indicating that State-run auto-IRA plans, in which employers are required to register if they do not already offer retirement coverage to their employees, have a variety of positive effects. This article reviews some data on how employees are responding to these plans.

Source: Asppa.org, August 2024

State 401k Mandates May Cause "Crowd-In" Effect, Boosting Private Plans

Small employers in states with mandates may gravitate toward private market plans for factors including plan design and the perceived cost of implementing state plans, according to NBER researchers.

Source: Planadviser.com, August 2024

Why Do Employers Establish Retirement Savings Plans? Evidence From State "Auto-IRA" Plans

Several states have recently attempted to boost retirement savings by enacting "auto-IRA" plans that require employers not currently offering an employer-sponsored retirement plan (ESRP) to either (1) establish an ESRP or (2) enroll employees in state-facilitated Individual Retirement Accounts. This 63-page paper identifies the effect of these state retirement plan mandates on a firm's decisions to offer ESRPs, treating the gradual rollout of these policies across states and employer size categories as a series of "experiments."

Source: Nber.org, August 2024

Rhode Island Secure Choice Becomes Law

Add the Ocean State to the growing number of states providing a state-run plan that affords private-sector employees retirement plan coverage if their employers do not.

Source: Ntsa-net.org, July 2024

Vermont Saves Joins Interstate Retirement Plan Partnership

Vermont Saves on June 27 announced that it has become a member of the Partnership for a Dignified Retirement, an interstate consortium whose other members are Colorado, Delaware, and Maine.

Source: Asppa.org, June 2024

Rhode Island Latest State to Pass Auto-IRA Bill for Uncovered Workers

Ocean State lawmakers passed the Rhode Island Secure Choice Retirement Savings Program Act (H.B. 7127) on June 11 to create an automated individual retirement account for uncovered workers.

Source: Ntsa-net.org, June 2024

Strong Support for State-Run Programs, Study Says

There is strong support among current and potential participants for state-run retirement plans that provide coverage for those whose employers do not, according to a recent study. And a panel of experts and state officials offer ideas regarding why.

Source: Ntsa-net.org, May 2024

Three-Quarters of Americans Favor State-Run Retirement Plans

Working Americans want state-facilitated retirement programs to help them prepare for their future, finds new research today from the National Institute on Retirement Security. According to the findings from the organization, 77% agree that a state-run program is a good idea. This view is particularly backed by Millennials, who showed the highest support among all generations (79%).

Source: 401kspecialistmag.com, May 2024

A Conversation About State-Based Retirement Programs

A look back at the policy landscape that led to state-facilitated retirement plans and a look ahead to the opportunities as these programs continue to gain steam.

Source: Georgetown.edu, May 2024

Washington State's New State-Mandated Retirement Program

On March 28, 2024, Washington State's Governor, Jay Inslee, signed into law a bill that creates a new state-run retirement program called "Washington Saves." Under the program, "covered employers" must give "covered employees" the opportunity to contribute a portion of their pay to an individual retirement account on a pre-tax basis to save for retirement.

Source: Beneficiallyyours.com, April 2024

State-Facilitated Retirement Savings Programs and DC Plans: A Comparative Review of Investment Design and Cost Structures

The design of a state-facilitated auto-IRA retirement savings program's investment menu, its cost structure, and fee transparency are important enablers of a participant's ability to build high-quality, well-diversified portfolios that will generate risk-adjusted returns over time. This article provides a comparative review of investment design and cost structures.

Source: Georgetown.edu, April 2024

Washington State Auto-IRA Law Signed

Washington Governor Jay Inslee last week signed legislation creating a state-facilitated program, Washington Saves, to provide coverage for those private sector employees. The program will launch by January 1, 2027, according to the announcement.

Source: Plansponsor.com, April 2024

Hawaii Retirement Savings Program Auto-Enroll Getting Closer

Automatic enrollment of eligible employees in the Hawaii Retirement Savings Program is closer to being put in place. Sen. Sharon Moriwaki introduced SB2553 on Jan. 19, 2024. Under the bill, employees would no longer be required to opt in to participate in the Hawaii Retirement Savings Program but rather would be automatically enrolled. When the program began, one of the features that distinguished it from other states' programs was that employees must actively opt-in if they want to participate.

Source: Asppa.org, March 2024

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