Sept 25, 2024 House Labor Agenda: IRA mandate on doctors and more

There are similar state sponsored retirement plans to HB 5461 in several states. Three of these are the Colorado Secure Savings program, the New Mexico Work and Save program, and the Illinois Secure Choice Program.

Each of these plans have no monetary cost to the employer, but any paperwork would be their responsibility. 

https://treasury.colorado.gov/colorado-securesavings-program

https://nmsto.gov/special-programs/work-and-save/

https://www.ilsecurechoice.com

In the case of the Illinois Secure Choice, once the initial registration is completed by the employer, the employee registers themselves for their desired savings program. Once registered for autoenrollment, there is no residual paperwork for the employer or the employee unless a change is made to their employment status. 

The annual fees for Illinois Secure Choice is 16$ + .32-.45% of assets, which falls on the employee.

https://cdn.unite529.com/jcdn/files/ILEE/pdfs/en_US/autoenroll_notice.pdf

In the case of HB 5461, it remains to be seen whether the burden of paperwork will outweigh the benefits of a savings plan. 

As of May, 17 states had passed such laws.

The subterranean argument goes like this: "Retirement savings plans are good, so everyone should have one. Some do not, so the government should fill the gap."

However, there are good reasons for states to refrain.

MarketWatch offers a fair summary of the debate, though slightly dated (2019). Clipped here for length.

https://www.marketwatch.com/story/state-sponsored-retirement-plans-will-help-more-people-prepare-for-old-age-why-do-they-have-so-many-critics-2019-04-26

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Critics argue state-sponsored plans are inappropriate for a few reasons. In some cases, the states are mandating that small businesses offer these auto-IRA plans to their employees, which have led to questions over legality given the Employee Retirement Income Security Act is the law overseeing private workforce retirement plans (the California lawsuit has squashed those concerns for now, some say). They also say small-business owners may become too overwhelmed to handle the paperwork involved, even if they’re not the ones administering the plans. Richard Thaler, a professor at the University of Chicago Booth School of Business and a Nobel Prize winner for his work in behavioral economics, said during a forum in 2016 small companies don’t already offer retirement plans because they’re “a pain in the neck.”

There’s also no need to add another type of retirement program, since there are so many options already to save, some critics say. “Availability and access to retirement savings options are not the problem,” the National Association of Insurance and Financial Advisors wrote in a position statement on its site. “There already exists a strong, vibrant private-sector retirement plan market that offers diverse, affordable options to individuals and employers.” Those without access to a plan at work can open their own IRAs at nearby financial institutions, it added, and might have better investment choices than if they rely on the state’s plans, critics say. “There simply is no need for a state program to compete with the private sector,” NAIFA wrote. https://www.naifa.org/advocacy/state-issues-positions/state-run-retirement-plans

Individual retirement accounts don’t allow employees to save as much, either, as their contribution limits are less than a third of a 401(k) plan (IRAs have an annual limit of $6,000 for someone under 50, compared with $19,000 for that same demographic in a 401(k) plan). And although small businesses blame costs for not offering a 401(k) plan, there are low-cost options available, said Tom Zgainer, founder and president of America’s Best 401(k), a retirement plan provider.

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