While the U.S. government has taken many steps to encourage business owners to offer retirement savings options for employees, employers are not obligated to offer a retirement plan under federal law.
As a result, at least 19 states have enacted their own laws to create a retirement option to allow all employees within the state to save for retirement.
Gov. Jay Inslee of Washington, for example, signed a bill in late March creating such a program.
While the program will vary depending on the state, the most common state programs require private employers who do not offer retirement savings options to automatically enroll employees in IRAs funded through payroll deductions. The state itself oversees and administers the program — commonly known as an auto-IRA program — and the investments are managed by private companies.
We asked two professors and authors of ALM's Tax Facts with opposing political viewpoints to share their opinions about whether state-facilitated retirement account requirements have a positive impact for taxpayers.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
Byrnes
Their Reasons:
Bloink: The vast majority of individual taxpayers say that they would participate in a state-facilitated auto-enrollment retirement plan if they were enrolled. Anything that state governments can do to encourage taxpayers to take control and save for their own retirements is a positive.
States that have provided auto-enrollment IRAs have seen the balances in these accounts grow dramatically since the programs were initiated. According to some reports, over 845,000 funded accounts under state-mandated auto-IRA programs now exist.
