2. State Run Retirement Plans: Exploring emerging trends and federal alternatives to the coverage gap
Lee Covington Senior Vice President & General Counsel Insured Retirement Institute

3. Current State Since 2010, 25 states have considered state-run plans
6 states rejected proposals in 2015
19 states introduced bills in 2016 (NJ, MD, CT, VT passed)
Pending: CA, MA, NY & NYC
8 states have passed study bills (CA, CT, VT, WV, MD, MN, and OR)
5 States (IL, MA, MD, OR, CT) have passed plans
2 states (NJ, WA) have passed voluntary marketplace bills

4. Current State - DOL
DOL directed by President Obama to create rules or guidance to facilitate state-run plans
DOL issued regulatory guidance (Interpretive Bulletin ) in January
Safe harbor for states to auto-enroll private sector employees if employers don’t offer plan
Three approaches for states under ERISA
Marketplace, prototype plan, open-network MEPs

5. Concerns about DOL Proposal
Significant Costs to State; Significant Costs and Risk to Employers
No Need
Nearly 80 percent of full-time workers have access to a plan.
More than 80 percent of workers with access participate.
IRAs and individual annuities are available to 100% of workers.
In Competitive Market, States Should Not Compete with Private Sector Plans
Discourages employers from offering private plans because easier to administer state-run plans based on plan features (auto-enroll)

6. Concerns about DOL Proposal
Safe harbor
Only applies to certain state arrangements; leaves out others with private non-ERISA arrangements through existing DOL safe harbors
Creates multiple classes of employers across state lines
Only for states; limited options to employers

7. Concerns about DOL Proposal
New automatic contribution option independent of existing IRS Code guidance
No specific requirements or time limitation applicable to auto-contributions
Could result in loss of participant protections
Portability issue/plans across state lines

8. Comments to DOL
Allow auto enrollment and auto escalation features for all private sector plans currently covered by safe harbor; not just state plans
Demonstrated benefits: increased earnings and overall savings for participants
Clarify existing IRA safe harbor is available for IRA state programs as long as voluntary.

9. Federal Alternatives
Encourage employers to make private-sector solutions available to employees
Permit Open MEPs
Starter 401(k)s for small employers
Auto-IRA Legislation (Mandating Auto-Enrollment)
Plan Start-up Credit
Simple IRAs and 401(k)s

10. QUESTIONS?
Lee Covington Senior Vice President & General Counsel Insured Retirement Institute Phone: