An increasing number of states are in the process of legislating auto-IRAs for employees of small businesses that are not automatically offered a pension plan or 401(k).
Backed by large groups such as AARP, these measures could help secure retirement for over 55 million Americans, or almost half of the workforce in the country.
But there is push-back too, from two notable places: employers and financial service firms.
But it is not currently getting the reception it needs to succeed. As explained by CBS News:
Yet as these bills wind their way through statehouses, they’re also getting major pushback from financial service firms because the auto-IRAs would typically be invested by state-administered agencies that might compete with private-sector retirement plan vendors and investment managers. Employers, which would be required to deduct the contributions from their employees’ paychecks and forward them to the state, are also expressing concerns about that role.
The American Council of Life Insurers has been the biggest and most vocal opponent. But in California, the Securities Industry and Financial Markets Association is part of a group of 36 trade and business organizations led by the California Chamber of Commerce that’s opposing a proposed auto-IRA. They want it amended to address a variety of concerns, including potential employer liability, said Marti Fisher, the Chamber’s policy advocate.
If passed, auto-IRAs will give employees the opportunity to opt-in or opt-out. “Some might opt out,” conceded Senator Daniel Biss of Illinois, the main proponent of that state’s plan. But of those who stay in, he believes “very, very few will be disappointed about their decision 10 years later” when they’re “surprised to have the beginnings of a nest egg,” he told CBS.