This piece by NFIB/Illinois State Director Kim Clarke Maisch was originally posted on rebootillinois.com:
The Illinois House is considering legislation, SB 2758, “Secure Choice Savings Program,” that would create an unprecedented state-run retirement plan for private sector workers.
No other state has enacted a state-run retirement system for private sector employees. It would be a big mistake if Illinois became the first.
This idea would add yet another bureaucratic burden on Illinois employers. Firms with more than 25 workers would be required to enroll employees who do not have access to a workplace retirement plan. Instead of growing the economy, these overburdened businesses would have to spend time and effort to set up and implement these plans.
Small-to-midsize businesses help drive our state’s job growth. Any mandate that would add complexity and disrupt these companies’ efficiency and productivity is very troublesome and unwise.
Instead of rushing headlong into a mandate with considerable downsides for the state, Illinois should do what several other states such as Oregon, Connecticut, Minnesota, and West Virginia have done: study the issue further.
Why are these states studying this mandate first, before enacting it? Plans for private sector workers are governed by the Employee Retirement Income Security Act (ERISA), which establishes strict rules that plan sponsors must follow. While the bill says the state-run plan is not designed to be subject to ERISA, we have no idea if the federal government will grant Illinois an exemption from these rules.
Lawmakers should demand to know, before passing this law, if under ERISA the state would have a fiduciary duty to plan participants. This means the state would be responsible for properly managing the plan, prudently selecting plan options and ensuring plan expenses are reasonable.
If private sector workers enrolled in the plan believe the state is not fulfilling its fiduciary obligations, they could sue the state. In addition, the state would be liable for breaches by state officials overseeing the plan’s administration.
As well, employers could also be considered plan fiduciaries and would be subject to the same compliance laws, associated costs and liabilities as the state.
The fact is that we just don’t know how this proposal will be interpreted by the federal government and the risks are simply too high to proceed without a definitive answer.
In fact, given the robust private market that exists for retirement plans, one has to question if SB 2758 is even necessary. Financial services companies work diligently to expand voluntary retirement plan coverage. It is their business to want to cover everyone and offer plan options for businesses of all sizes.
Nearly 80 percent of full-time American workers already have access to an employer-based retirement plan. Of those, more than 80 percent participate. And IRAs are an option available to anyone.
The state would do better to encourage additional private-sector plan coverage and employer awareness. There is no need to replace the competitive marketplace of retirement plan products and services already available to employers and workers.
There is no question that encouraging more people to save would be beneficial. Retirees who are self-sufficient would have less need to rely on government programs. But addressing the retirement savings issue deserves sound, well-thought out solutions, not proposals like SB 2758 that are questionable at best.
