The report, “Retirement Security: Federal Action Could Help State Efforts to Expand Private Sector Coverage,” discusses stakeholders’ concerns about—and potential solutions for—the millions of Americans who are currently not enrolled in a retirement savings program.
The Government Accountability Office (GAO) analyzed data from the 2012 Survey of Income and Program Participation (SIPP). While it found that actual, W–2-adjusted participation rates are higher than self-reported levels—54.1% vs. 45.2% of private-sector workers—that still leaves roughly half not participating in a retirement plan. Among non-participants, the GAO found, just 16% elected not to enroll in a plan for which they were eligible. Sixty-eight percent were not offered a plan, and 16% were not eligible for an offered program.
Therefore, some states are looking to establish state-run plans for private-sector workers. Strategies that have boosted private-sector participation rates—a simplified program, workplace access, automatic enrollment and financial incentives—may be implemented in publicly run plans as well, and state programs would reduce the administrative and financial concerns that have prevented many employers from offering their own in-house plans. One significant hurdle, however, is the Employee Retirement Income Security Act (ERISA)’s pre-emption provision, which invalidates “any and all state laws that ‘relate to’ any private sector employee benefit plan.”
This “enables employers to establish uniform plans and administrative schemes,” the GAO writes, “preventing them from having to comply with different requirements for employees located in different states.” It also promises litigation for states that attempt to establish retirement plans for their citizens.
According to the report: “One national stakeholder indicated that it might be beneficial for a state to implement a program and go through resulting litigation to resolve some of the areas of legal uncertainty and clear the way for other states to implement similar programs.” Whether any state volunteered for this trailblazing opportunity was not reported.
NEXT: DOL guidance, GAO recommendations.
In lieu of court case trial and error, this summer, President Obama charged the Department of Labor (DOL) with publishing a proposed rule to address the lack of clarity under the Employee Retirement Income Security Act (ERISA)’s pre-emption provision, which the department submitted to the Office of Management and Budget (OMB) earlier this month.
Without interference from Congress, though, officials from the department claim that their hands are tied under ERISA. To enable further change, the GAO report recommended addressing uncertainty by:
- Amending ERISA’s pre-emption provision. Some stakeholders suggested that Congress add an exception for state efforts to expand coverage in workplace retirement savings programs.
- Developing a pilot program. DOL officials reportedly told the GAO that such a program, proposed in the Fiscal Year 2016 President’s Budget Submission, could identify actions for states to take when developing their own retirement plan.
- Instituting a safe harbor. According to the GAO, the DOL and a national stakeholder said that Congress could authorize the department to institute a regulatory safe harbor for certain state efforts.
The report can be viewed in full here.
« Retirement Readiness in the Age of High Tuition