States Try To Save Retirement While Washington Waits

AN AMBITIOUS EFFORT To close one of the biggest gaps in the American system of retirement saving is under way in California.

- Penelope Wang

52%

Percentage of U.S. household ages 55 and up that have no retirement savings in defined contribution plans or IRAs

22%

Percentage of U.S. households ages 55 to 64 with no retirement savings that own a home that is paid off

$21,000

Median net worth of U.S. households ages 55 to 64 with not retirement savings

Governor Jerry Brown, a Democrat, is expected to sign into law a program that will provide retirement savings coverage to the estimated 7.5 million small-business employees in the state who lack workplace plans. The California Secure Choice program will require small-business employers to auto-enroll their workers in an IRA.

The move by the most populous state in the country adds critical mass to a state-level movement to improve retirement security for workers who lack employer plans. “It will be a watershed moment,” says Sarah Mysiewicz Gill, a senior legislative representative at AARP. “States keep an eye on California’s innovation, and this will spur more to go ahead with their own savings plans.”

Some 30 states are considering or developing savings programs to cover their small-business employees, according to the Georgetown Center for Retirement Initiatives. Washington and Oregon are set to launch programs in 2017, while Connecticut, Illinois, Massachusetts, New Jersey and Maryland have enacted legislation to set up plans.

Backers of the initiative include retiree advocates, financial-services companies that manage retirement plans and state officials who want to get ahead of the potential expense of supporting an impoverished aging population. But many small-businesses organizations, which fear the costs and complexity of new regulations, have resisted the notion of a mandate.