Similar to healthcare plans, access to workplace retirement plans is starting to be considered a right not a benefit for employees. Though the federal Government will not be offering access to the Thrift Savings Plan anytime soon, they have made it easier for states to offer and even mandate that all employers of a certain size have access to a state run retirement plan in an initiative led by no less than President Obama and the Depart of Labor Secretary Thomas Perez.
At least 24 states and counting led by California, Illinois and Oregon have drafted or are considering drafting laws which would require private employers to offer participant directed, payroll deducted retirement plans to try to cover the 50% of workers who do not have access to a plan at work. Seems reasonable right? But the devil is in the details.
As reported in the WSJ (Subscription required), Obama and Perez have granted states the right to create a MEP (Multiple Employer Plan) where smaller companies can enjoy economies of scale that would be exempt from ERISA giving employers relief from onerous fiduciary and compliance regullations. The rub is that private retirement plan providers that want to compete with state MEPs will have to comply with ERISA which leading benefit consultants declare as unfair.
Employers should be concerned for two reasons. As the WSJ suggests, this might be the 1st step in the government socializing and taking over private retirement plans, something that presidential candidate Sen. Marco Rubio has already suggested. Secondly, employers that voluntarily offer ERISA plans to employers have an advantage when recruiting and retaining valuable employees especially compared to smaller companies. Soon that advantage may be entirely wiped out with a cheaper and less complex retirement plan that caries much less liability.
One has to wonder why the government would want to interfere with a grassroots industry like DC/401(k) plans that covers half of the workforce and has attracted over $6.5 trillion, almost $15 trillion if you count IRAs. And further, you have to look no farther than state run pension plans that have $5.6 trillion in assets with estimates by academics of $4 trillion in unfunded liability to wonder why we would want them to enter the private sector.
