American Retirement Association Supports Rhode Island Auto-IRA Bill
“The current retirement system in the private sector works well for those to have access to it. The challenge is to expand the availability of retirement savings in the private workforce.” That was the core message of American Retirement Association Congressional Affairs Manager Andrew Remo in testimony at a Rhode Island House Committee of Labor hearing on the Rhode Island Private Employer IRA Program Act.
Remo expressed the American Retirement Association’s strong support of the measure, which House Majority Whip John G. Edwards (D-Tiverton, Portsmouth) introduced on April 15. The bill would establish a private-sector employer IRA program through which private-sector employees could contribute at least 3% of their wages into a program that would be overseen and managed by the Rhode Island Department of Labor and Training and the State Investment Commission. Private-sector employers with five or more employees that do not offer a retirement plan could either establish one, make a private-sector IRA available or participate in the state-run auto-IRA program the bill would establish.
“The key to a successful retirement for the citizens of the Ocean State is having a retirement plan at work,” said Remo. “Simply put, saving at work works.” It's estimated that more than quarter of a million Rhode Island workers do not have access to a retirement plan at work, he noted.
Remo observed that the American Retirement Association supports the measure not only because it would expand the ability of private-sector employees in Rhode Island to save for their retirement through an employer-based account, but also because it will have minimal effects on the employers.
“There is no requirement for employers to contribute to this plan. It is just a payroll slot, so administrative costs for the employer are minimal. In fact, the American Retirement Association strongly supports H.B. 6080, with minor modifications, because the proposed auto-IRA framework will expand the availability of workplace retirement savings without burdening small business owners,” he testified.
Remo stressed the importance of private-sector involvement, which he called essential for the initiative’s success. “H.B. 6080 encourages private-sector involvement through an Internet website where private employers will be able to identify private-sector providers that are offering auto-IRA or other retirement savings arrangements. The American Retirement Association believes this approach is critical, and will ensure that Rhode Island residents will have access to a high-quality retirement savings arrangement,” he told the committee.
The American Retirement Association does not consider the bill to be perfect, Remo noted. “The American Retirement Association would like to see some minor changes to H.B. 6080 that would make it more clear that employers subject to the legislation would be allowed to use private payroll deduction IRA products in order to meet its requirements. The American Retirement Association also has concerns that the legislation provides for a broad ‘hardship exemption’ that essentially allows any business in Rhode Island to not comply with the bill’s requirements by simply sending a notification to the Rhode Island Department of Labor and Training. This provision could limit the effectiveness of the bill’s effort to provide access to payroll deduction savings in the workplace to as many workers as possible,” he said.
Remo concluded with an endorsement of the measure: “H.B. 6080, with the minor changes the American Retirement Association have suggested, will address the real problem of coverage. The current system is working very well for millions of working Americans. Expanding availability of payroll deduction savings is the key to improving the system. There is no need for dramatic changes, but Rhode Island could take a big step forward by adopting a state-based automatic IRA proposal similar to Illinois to make it easier for private employers, particularly small businesses, to offer a workplace savings plan for their employees.”