Senate Republicans seek to scuttle state-run auto-IRAs
- Senate Republicans voted down the auto-IRA program, which would allow workers not covered by an employer-sponsored retirement savings plan to join their state’s plan, reports Bloomberg. The Obama administration announced the auto-IRA state-sponsored individual retirement accounts last year at the end of the former president’s second term.
- Republican lawmakers said they oppose auto-IRA programs because they’re burdensome for employers, might end up charging high fees and get around stringent regulations covering IRAs. In states that have auto-IRA regulations in place, employers must either offer their own IRAs or sign up workers for auto-IRAs, Bloomberg said.
- A handful of states passed auto-IRA mandates: California, Connecticut, Oregon, Maryland and Illinois. The Republican vote sets up a potential confrontation between the party and Democratic-leaning states in favor of such programs.
With many American workers behind in saving enough money for retirement and others without an employer-sponsored plan, any program that helps them get started saving could be beneficial — for employees and employers alike. Financial wellness is a key part of ensuring an employee feels productive and happy at work. Research shows that employees worry not just about when they will be able to retire, but if they will.
An alternative to auto-IRA plans is the pooled employer plan (PEP), a type of defined contribution program in which employers are able to sponsor plans by pooling their resources. Unlike auto-IRAs, which are state-sponsored and funded through payroll deductions, PEPs have bipartisan support from lawmakers. Last year, the House introduced the Retirement Security for American Workers Act to create PEPs. Whether the bill will move forward is unknown.
A House vote to keep states from sponsoring auto-IRAs could permanently end the program. Ending the program would do little to address employee retirement stress, and could create a confusing scenario for those states that have moved towards addressing retirement challenges.