US states including New York are considering legislation to create government-sponsored payroll-deduction-based retirement programmes for small businesses.
According to the Washington Post, more than half of US households aged 55 or over have no retirement savings, leaving them with only Social Security payments. Some 40 states have considered introducing legislation since 2012 to establish state-facilitated retirement schemes for private sector workers.
Five have already enacted state-run programmes and two, New Jersey and Washington State, have launched marketplaces to enable employers to access low-cost private sector retirement plans.
New York’s proposal, put forward by Democratic governor Andrew Cuomo in his 2018 budget and awaiting action in the Legislature, would create a state board to oversee investments made through payroll deductions. But it would not include employer contributions.
It is similar to initiatives launched in California, Connecticut, Illinois, Maryland and Oregon, although participation would be voluntary in New York, while elsewhere it is compulsory for companies over a certain size.
Mandated state-run retirement savings plans have been criticised by both employers and Congressional Republicans, who claim they stifle private competition, impose onerous regulations on business and expose organisations to lawsuits.
In California, critics attest that a programme to enrol nearly seven million workers could expose taxpayers to a costly bailout should the investment fund plummet in value during the next recession.
But California Republican state senator John Moorlach, a certified financial planner, warned that low-income workers fail to save because they could not afford to rather than because they do not want to. He noted that the federal government closed the Obama-era myRA programme last summer due to lack of demand as a result.
The Treasury Department said the myRA scheme, launched in late 2015 for people without access to a 401(k) or other workplace retirement plan, had around 20,000 accounts with funds averaging about US$1,500. It would have cost taxpayers US$10 million a year to maintain, the Treasury added.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
US states including New York are considering legislation to create government-sponsored payroll-deduction-based retirement programmes for small businesses.
According to the Washington Post, more than half of US households aged 55 or over have no retirement savings, leaving them with only Social Security payments. Some 40 states have considered introducing legislation since 2012 to establish state-facilitated retirement schemes for private sector workers.
Five have already enacted state-run programmes and two, New Jersey and Washington State, have launched marketplaces to enable employers to access low-cost private sector retirement plans.
New York’s proposal, put forward by Democratic governor Andrew Cuomo in his 2018 budget and awaiting action in the Legislature, would create a state board to oversee investments made through payroll deductions. But it would not include employer contributions.
It is similar to initiatives launched in California, Connecticut, Illinois, Maryland and Oregon, although participation would be voluntary in New York, while elsewhere it is compulsory for companies over a certain size.
Mandated state-run retirement savings plans have been criticised by both employers and Congressional Republicans, who claim they stifle private competition, impose onerous regulations on business and expose organisations to lawsuits.
In California, critics attest that a programme to enrol nearly seven million workers could expose taxpayers to a costly bailout should the investment fund plummet in value during the next recession.
But California Republican state senator John Moorlach, a certified financial planner, warned that low-income workers fail to save because they could not afford to rather than because they do not want to. He noted that the federal government closed the Obama-era myRA programme last summer due to lack of demand as a result.
The Treasury Department said the myRA scheme, launched in late 2015 for people without access to a 401(k) or other workplace retirement plan, had around 20,000 accounts with funds averaging about US$1,500. It would have cost taxpayers US$10 million a year to maintain, the Treasury added.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
