Editors' pick: Originally published March 6.
State-sponsored retirement plans - sometimes known as "secure choice" plans or "auto-IRA plans" - are facing opposition in Washington, D.C.
That's the case even though state-sponsored retirement plans have barely gotten off the runway.
The plans, available now in almost half of all 50 U.S states, generally allow private-sector workers access to a retirement plans, in the event they work for a company that doesn't offer 401(k)-like retirement plans.
In states like California, Oregon, Maryland, Illinois and Connecticut, private sector workers are eligible for secure choice plans automatically, and they can also have their plan payments deducted automatically from their paychecks.
The problem, secure choice plan critics say, is that private sector companies may decide to drop their own 401(k) plans, to save on the high costs of creating and managing company retirement plans.
Reasons vary for the opposition to state-sponsored retirement plans, but, as usual, cash is one culprit.
Data shows that costs to provide company sponsored 401(k) plans can add up, especially for small businesses. According to the U.S. Bureau of Labor Statistics, in June 2016, average costs in private industry for retirement and savings benefits stood at $1.27 per hour worked, or 3.9% of total compensation. If companies think they can save some cash by farming out the retirement plan to states like California, they may be tempted to do so, talent recruitment tool or no recruitment tool.
"The Employee Retirement Income Security Act of 1974 (ERISA) has been a key component of our retirement system's legal framework for over 40 years, regulating important aspects of employer-provided plans at the federal level," stated the U.S. Chamber of Commerce, in a December, 2016 memorandum. "The Chamber is concerned that state actions establishing and regulating private employer-provided plans will create unnecessary complexity in the system. Layering a state-imposed retirement regime on top of ERISA will cause unnecessary burdens, particularly for small businesses, and it could have a stifling effect on the very purpose of ERISA."