State-run retirement plans for private-sector workers get federal help

The U.S. Department of Labor unveiled a new rule in August that it hopes will remove uncertainties about the role of states in administering retirement plans for private-sector workers. Thus far, eight U.S. states, including Illinois (SB 2758, enacted in 2014), have passed laws to create payroll-deduction IRA programs. They are designed to help individuals who don’t have workplace savings arrangements such as a 401(k) plan. (One-third of U.S. workers do not have access to retirement savings plans through their employer.)

Under the new rule, The Washington Post reports, state-administered plans that meet certain criteria will not be subject to a federal law that oversees retirement plans and pensions. Administered by a seven-member board, 
Illinois’ Secure Choice program expects to begin enrollment next year. Participants will be enrolled in a Roth IRA with a default payroll deduction of 3 percent. At any time, enrollees can change their contribution level or opt out. These accounts will be portable from job to job. Employers who have at least 25 workers and who have been in business for at least two years must automatically enroll their employees (unless these businesses offer another savings plan).
Stateline Midwest: September 20162.31 MB