A new "opt out" private sector retirement savings plan was just passed in Illinois (see below). The outgoing Governor has said he will sign it into law.
http://www.chicagobusiness.com/article/20141203/BLOGS02/141209872/new-illinois-law-enrolls-2-5-million-workers-in-retirement-plansIt seems like a good tool to encourage savings and educate the masses on the importance of saving early for retirement, compounding and help them learn the basics of investing. Should other states also enact similar legislation?
After lurking on this site for a while and educating myself on how to retire early (or at least securely), I am amazed at how anyone could not support this Bill. Without getting too partisan, why would a company (or a legislator with a pension) not support an opt out retirement program for a worker given the utter lack of proper savings in this nation?
As an aside, The Chicago Tribune blasted Republicans yesterday for not supporting it.
http://www.chicagotribune.com/news/opinion/editorials/ct-quinn-biss-illinois-republicans-retirement-edit-20141209-story.htmlNew Illinois law enrolls 2.5 million workers in retirement plans
By Greg Hinz December 03, 2014
With not a vote to spare, Illinois lawmakers approved a bill that would enroll 2.5 million private-sector workers in a retirement savings program unless they opt out.
The action came yesterday evening when the state Senate voted 30-25 to ratify amendments to S.B. 2758, sponsored by Sen. Daniel Biss, D-Evanston. Exactly 30 votes were needed; two senators did not vote.
Earlier in the day, the House passed the measure by a somewhat wider 67-45 margin. Gov. Pat Quinn is expected to sign the Biss bill into law.
No American state now has anything quite like the program, which would apply to employees of firms with at least 25 workers who do not have access to an employer-provided retirement account. That may explain some of the opposition, especially from the insurance industry and Springfield Republicans, who say the measure was rushed through and should have been left for Gov.-elect Bruce Rauner to consider.
But Biss said a similar measure was endorsed both by President Barack Obama and GOP nominee Sen. John McCain in the 2008 election, and he expects great things from it.
'UNDERDISCUSSED'
"Of all the economic questions affecting the middle class, retirement is the one most underdiscussed," he said. "We talk about jobs and so forth. But people are petrified" when retirement comes up.
Under the measure, qualifying employees will be asked now or when they are hired whether they want to contribute 3 percent of their salary to a retirement account. Unless they say no, the money will be deducted from their check, just like taxes, and go into an individual Roth Individual Retirement Account that will be tax-free after retirement.
Operating much like the state's Bright Start college savings program, a panel including the state treasurer, budget chief and several outside directors named by the governor will hire a private firm that will run the program and offer various investment options. The program, called Secure Choice, will be portable, carrying over to a new employer if a worker changes jobs. Employees can contribute more or less than 3 percent of their salary if they choose.
"For two-thirds of today's retirees, Social Security is their primary source of income," said Biss, a former mathematics professor. "The opportunity to save using a Secure Choice account will prevent many seniors from facing appalling choices."
Biss disputes charges that the plan will place a big new burden on business. Companies merely have to offer new hires a form to decline enrollment and then integrate withholding into their regular payroll software, he said.
Still, former Illinois Treasurer Alexi Giannoulias ran into political problems when the Bright Start program underperformed during the financial crisis of several years ago. But one outside research organization, the Chicago-based Woodstock Institute, said the program "will help millions of Illinois workers save for retirement."
Fees will be limited to a maximum of 75 basis points, or 0.75 percent, of the value of an individual's savings account. The bill takes effect June 1, with a two-year setup period, so no savings accounts will be established until June 2017.
Note: Daniel Biss' profession has been corrected.