WASHINGTON, D.C. -- U.S. Senator Martin Heinrich (D-N.M.) introduced legislation to put a dignified retirement within reach for more American workers. The State Retirement Savings Act would allow states to create Individual Retirement Account (IRA) programs where workers and employees would automatically be enrolled upon hiring to start saving. States are already instituting plans like this across the country, and are lowering the cost of entry into retirement saving for middle class families, as well as reducing the burden of regulation on small businesses.
“After a lifetime of hard work, Americans deserve to retire with dignity. Yet too many families are unprepared for retirement. This legislation will make saving for retirement easier by providing workers with a simple way to put money away each month and easing the burden of participation and compliance on small businesses," said Sen. Heinrich. "Allowing people who have worked their whole lives to enjoy their later years with the peace of mind that comes with financial stability is a cornerstone of a thriving middle class. By encouraging individual investment, we help families live better in retirement."
When workers have access to a retirement savings plan through their employer and are automatically enrolled in that plan, they are more likely to save for retirement and build financial security later in life. However, according to the AARP Public Policy Institute, about 62 percent of New Mexico’s private sector employees—roughly 336,000—work for an employer that does not offer a retirement plan.
The State Retirement Savings Act would give state legislatures the legal authority to build new retirement programs that are custom tailored for each state. In addition to authorizing state automatic IRA programs, the bill would allow the state to help small business come together and create pooled 401(k) plans, at lower cost and with fewer burdens than going it alone.
Specifically, the State Retirement Savings Act makes permanent two pieces of regulatory guidance issued by the U.S. Department of Labor. The legislation would codify regulations that allow for state-run multiple employer plans. Multiple employer plans allow small businesses to offer employees 401(k) retirement savings accounts, while in turn reducing the regulatory burden that makes offering such plans difficult for small business. Additionally, the legislation would codify another proposed regulation regarding state managed payroll deduction savings accounts in the form of IRAs.
A copy of the bill is available here.