States Taking Action to get Retirement benefits for People
Many studies have found that people are not saving enough for retirement these days. To rectify the situation, the states have come to the forefront and have launched many programs where the employees get to save some money towards their retirement benefits. Some programs have already been launched and some are to come soon. These programs seem to be a ray of hope for people who don’t have any retirement saving funds.
The Shocking Fact about Retirement benefits
A recent federal report has uncovered a shocking fact about retirement benefits. It states that about 55 percent of households that have workers between the ages of 55 to 64 have less than $25,000 saved up towards their retirement benefits savings.
States’ Initiatives
Seven American states have initiated a program to help people save up for retirement. In Massachusetts, the treasurer has the responsibility of handling the investments and contributions for the voluntary programs that are for small nonprofit organizations.
States such as Maryland, Oregon, Connecticut and Illinois have begun several mandatory programs where a small percentage of an amount is automatically reduced from the employee paycheck and the same amount is added in an IRA in a financial establishment. In this system, a person has the complete liberty to back out from the program. In this program, the employers only have a small role to play, they educate employees on the program and send the payroll deductions to the respective states. The employers are not asked to contribute financially.
The Marketplace Model
Washington and New Jersey have adopted an innovative marketplace model in which the states create an online portal of retirement plans and any employee can get himself or herself enrolled into it. The state sets the basic standards and quality parameters for each of the retirement plan provider.
Making Employers Responsible
Some states are aiming towards making employers responsible for ensuring that the employees have a retirement benefits account. In a program launched by Maryland, if the employer doesn’t enroll its employees in a program, the employer needs to pay a standard filing fee of $300.
Illinois aims to launch a new program in June 2017. The businesses that have 25 or more employees and offer no retirement benefits plans would be required to participate in the program. Employees would be automatically enrolled when an employer joins but the employees have the option to opt out of the program. When the employees are enrolled 3 percent of their salaries/wages would be placed in Roth IRA and this percentage can be changed by the employee.
