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Advocacy and State-Run Retirement Plans
Monday, October 10, 2016 6:30 AM

By Megan Collins Balogh, Manager, Corporate and Legislative Affairs, CUNA Mutual Group

A growing national trend seeks to change the way Americans save for retirement. As research continues to indicate a majority of Americans are not saving enough for a financially secure retirement, state and local officials are introducing plans to expand the public retirement system.

In 2015, at the urging of President Obama, the U.S. Department of Labor adopted rules to remove regulatory barriers which previously prevented state-sponsored retirement plans. Soon after, more than 30 states introduced legislation to establish or research state-run plans for private sector workers not participating in an employer-sponsored plan.

Now, short of state action, even large cities are looking for ways to address the savings gap. For example, in Pennsylvania, there wasn’t a state-sponsored plan or pending legislation for one, so on June 16 the Philadelphia City Council adopted a resolution to create the Task Force on Retirement Security for Private Sector Employees in Philadelphia. The resolution cited a study commissioned by the city council, which found only 48 percent of Philadelphia workers ages 25-64 have access to an employer-sponsored retirement plan and only 37 percent of those employees actually participate.

As a provider of retirement products and services to credit union members and system employees, CUNA Mutual Group is aware of the retirement savings gaps in your state and all states across the country, and we are committed to empowering hardworking Americans to achieve financial security. To that end, CUNA Mutual Group advocates for state retirement initiatives which promote private sector savings through education and collaboration with the private sector as well as federal initiatives which complement the private sector. But not all state-run retirement plans are created equal. And some of the plans introduced in states may provide only limited flexibility for credit union members and employees looking to save for retirement, while other state plans may not allow contributions from these individuals at all.

Generally, there are three state-run retirement models gaining momentum in states: the Marketplace, the Prototype and Multiple Employer Plan, and an auto-enrollment IRA. What follows is a description of these three plan options and CUNA Mutual Group’s advocacy position to enable maximum savings for credit union members and system employees.

The Marketplace
Under a Marketplace approach, states establish and facilitate a forum for private sector plan providers to sell retirement plans to individuals and small businesses. Currently, Washington is working to implement a marketplace—plans available include target and balanced funds as well as the government’s myRA. There are no stated minimum contributions and an employer match is available, though these plans are subject to additional employer requirements under ERISA. As employees leave a job, the marketplace option allows individuals to move with their plans and roll retirement savings into a new plan. In addition to Washington, New Jersey is also implementing a marketplace.

CUNA Mutual Group strongly supports legislation to implement marketplace plans which are open to private sector retirement plan providers and improve savings access for all credit union employees and members.

The Prototype and Multiple Employer Plan
Multiple Employer Plans (MEP) allow businesses to pool resources and increase the number of participants in a group policy, despite multiple policyholder employers. The MEP combines investment returns into a single asset pool; employers set contribution rates and individuals maintain their own accounts. While substantially similar, a prototype plan allows only a single plan design.

In MEP states, the state is the plan fiduciary and responsible for policyholder communications, selection of service providers, and assumes liability for the plan. While achieving economies of scale, MEPs compete with the private market and generally fail to provide wider-reaching savings vehicles to employees without access to retirement plans. In addition, MEPs feature few plan options and enjoy incentives and exemptions not available to the private market. Given the limited availability and unleveled playing field with the private sector, CUNA Mutual Group opposes MEPs and prototype plans. At this time, only Massachusetts is working to adopt a prototype plan for small non-profits.

Auto-Enrollment IRA
States where auto-enrollment IRA plans are approved establish mandatory savings programs for most employees without access to an employer-sponsored retirement plan. Plan offerings usually include only Roth IRAs and traditional IRAs, employees must choose to opt out of the plan, and no employer match is permitted. Additionally, employers must provide plan administrative support. Currently being enacted in states like Illinois, Connecticut, California, Oregon and Maryland, CUNA Mutual Group supports auto-enrollment plan legislation as a means to increase overall retirement savings so long as such legislation is tailored to assist small employers not currently served by the private sector (e.g. Illinois Secure Choice Savings Program).

Like the states implementing these plans, CUNA Mutual Group’s advocacy goal is to increase access to retirement savings opportunities throughout the credit union movement. As states develop and adopt state-run retirement plans, CUNA Mutual Group will continue to support plans to increase overall retirement savings and may ask for additional support from your state association and credit union to push forward the best proposals.

Megan Collins Balogh is Manager, Corporate and Legislative Affairs for CUNA Mutual Group. You can reach her at