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Why Are States Acting?

IMPROVING ACCESS TO RETIREMENT SAVINGS ACCOUNTS Presentation Consumer Federation of America Financial Services Conference December 1, 2016 Angela Antonelli , Executive Director Center for Retirement Initiatives McCourt School of Public Policy. Why Are States Acting?.

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Why Are States Acting?

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  1. IMPROVING ACCESS TO RETIREMENT SAVINGS ACCOUNTSPresentation Consumer Federation of America Financial Services ConferenceDecember 1, 2016Angela Antonelli, Executive DirectorCenter for Retirement InitiativesMcCourt School of Public Policy

  2. Why Are States Acting? • Top financial concern • Too little saved and Social Security isn’t enough • More than half of private sector workers are uncovered • Long-term budget consequences • Long-term economic consequences

  3. From Crisis to Opportunity • For Innovation and Leadership Look to the States • States Are Stepping Up To Address Retirement Security • Goal To Design Simple, Low-Cost, Easily Accessible and Effective Savings Options

  4. How Would ERISA Apply to State Initiatives? • States were unsure as to whether and how ERISA would apply to these state-sponsored retirement savings plans. • President directed the Department of Labor (DOL) to issue rules to "Provide a Clear Path for States to Create Retirement Savings Programs” on July 31st, 2015. • DOL took the following actions: • Created a new regulatory safe harbor allowing state sponsored mandatory auto-enroll IRA to be exempt from ERISA. DOL also wants to expand the safe harbor to political subdivisions (e.g., cities, counties, etc.) • Issued guidance for ERISA covered plans –MEPs, Prototype Plans, and Marketplace.

  5. Since 2012, More Than 30 States Have Considered or Enacted Private Sector Retirement Initiatives

  6. The States Are In Various Stages of Planning and Implementation

  7. 5/8 =The Mandatory Auto-IRA

  8. States Have Several Options

  9. Key Plan Design Considerations • Voluntary or mandatory participation • Role of employer and employer liability • Types of employers and workers covered • Types of product offered • Default, minimum and maximum contribution levels • Use of other tools and nudges such as auto-enroll and auto-escalation • Use of tax or other incentives • Role of the state • Governance • Program funding • Investment and management of assets • Financial education • Withdrawal rules and portability • Program administration (e.g., recordkeeping/account consolidation) • Lifetime income

  10. Outlook for 2017 • Actions of Congress and the incoming Administration related to retirement security • Implementation work will be watched (WA,OR first) • State and cities continue to study options (VT, NY, NM, UT, Seattle, Philadelphia & others) • Evolution of models continues and one or more new state programs • Private sector innovation in response to state efforts • Expand focus from savings accumulation to decumulation and lifetime income

  11. CRI.GEORGETOWN.EDU

  12. Center for Retirement InitiativesMcCourt School of Public Policycri.georgetown.eduFollow us on social media for updates:FacebookLinkedIn Twitter: @cri_states

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