STATES SEEK TO BOOST RETIREMENT SAVINGS

 

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Some states are seeking to help their residents save for retirement by looking outside the ERISA box to state-run individual retirement arrangements.

Maryland has just passed a law to require private-sector employers that aren’t offering their employees retirement plan coverage to automatically enroll employees in the state-run IRA program.

The Maryland law says the program is written so it is exempt from the federal Employee Retirement Income Security Act, which generally governs employer-sponsored retirement plans.

Maryland’s Small Business Retirement Savings Program and Trust (S.B. 1007), was signed May 10 by Maryland Gov. Larry Hogan (R) and becomes effective July 1.

Illinois, New Jersey and Washington have similar laws in place. California and Oregon have established committees to write legislative language for state-run retirement programs. Other states have expressed interest in the programs.

However, the Colorado legislature recently defeated a bill that would have provided a Roth-type IRA program funded by after-tax employee contributions. The bill would have allowed employees to opt out of participation. Another attempt will be made in the 2017 session of the Colorado General Assembly, Rep. Brittany Pettersen (D), a bill co-sponsor, told Bloomberg BNA.

Under Maryland’s program, the law doesn't specify a size requirement for an employer to be subject to mandated participation in the retirement plan.

The Maryland law does specify that covered employers don't include: government agencies, whether federal, state, county or municipal; employers that currently offer, or have established within the past two years, savings programs separately from the S.B. 1007 requirements; and employers that haven't been continually in business during the current and preceding calendar years.

Maryland’s law also doesn't set a mandatory contribution rate for employees. A board established by the law will determine contribution rates.

See related story, Maryland Adopts Private-Sector Retirement Savings Program.

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