Earlier this spring on June 17th, Maine's House of Representatives and Senate approved legislation that would create a Payroll Deduct IRA plan for Maine-based workers whose companies did not otherwise offer a retirement plan. Maine is only the latest state to enact such legislation, but almost certainly not the last. Initially, Maine's program will work similarly to other programs of this type in that it will be required to be adopted by any employer with 25 or more eligible employees starting April 1, 2023. An interesting twist in the Maine program is that it is intended to also go to smaller employers once it is off the ground with 15-24 employee companies mandated in October, 2023 and then 5-14 employee companies that following April. Of course, these smaller groups can participate ahead of the mandate if they choose.
This is the most aggressive one's of these state programs that I've seen and is part of a broader overall idea that I agree with, which is that coverage is the primary retirement issue in the U.S. today. The states and the federal government agree, with many states having enacted state mandates or in the process of doing so. See this piece put out by Georgetown University with the latest information for each state.
Georgetown's State Program Brief
The federal government is said to be similarly considering a uniform version of these types of programs (which would be very helpful so we don't all have to learn 50 different sets of rules) as well. But even in lieu of that, with upwards of 50% of U.S. workers not having access to a workplace retirement plan, the need is there to expand opportunity. With the recent creation of Pooled Employer Plans and many now up and running, the coverage gap is starting to get smaller and that's a good thing for everyone. Once we get coverage and equity gaps narrowed or eliminated, new innovation in Retirement Income solutions, more sophisticated investment structures and better technology can start to evolve and make a dent in elderly poverty rates.
In short, I think that these types of state-run programs and new types of retirement plan offerings add complexity to the industries offerings, but more importantly address a real need and a problem that needs to be solved. The challenge will be to the private sector in stepping up and ensuring that the public options don't become the standard.
- Jason Grantz, QPA, QKC, QKA, AIFA
