Starting January 1, 2017, Washington will be the first state to offer a state-run retirement plan for private-sector workers.
According to the Puget Sound Business Journal, the Small Business Retirement Marketplace will be an Internet site through which individuals and employees of small companies can set up retirement plans. It will operate much like the Washington Health Exchange does now for individuals to buy health insurance.
Through the portal, workers will be able to choose among several established retirement plan providers, which will be screened by Washington State, the news report says. The system will have no contribution minimums, and such a plan will remain with the person even when they switch jobs. It will allow employees to contribute through an employers’ payment system, so that contributions will be automatically deducted from a paycheck, but if an employer doesn’t want that, the system also can regularly deduct contributions from a person’s bank account, or individuals can make contributions when they wish.
Mark Iwry, senior advisor to the U.S. Secretary of the Treasury was in Seattle to talk about the marketplace. “For the employer [that] does not sponsor a 401(k), the retirement marketplace would make it easier to select a provider and adopt a plan,” he said, according to the news report, “with the assurance that the provider has been vetted, and the fees are not excessive.”
Last November, the U.S. Department of Labor (DOL) published a notice of proposed rulemaking and an interpretive bulletin meant to guide states as they create such retirement programs. However, retirement plan industry groups contend the DOL proposal for state-run retirement programs would result in a confusing patchwork of laws and other unintended consequences. And some say such plans will not close the retirement savings gap much.
Research from the Center for State and Local Government Excellence (SLGE) suggests a national auto-IRA program would be more efficient.