Approximately 40% of the workforce is not able to save for retirement through payroll deductions, said Pete Isberg, Vice President of Government Relations for ADP, LLC, and Chair of APA’s Government Relations Task Force (GRTF) Subcommittee on Retirement Accounts, during a presentation at APA’s Capital Summit. When employees retire without savings, they draw heavily on state assistance budgets. APA plays an active role in working with state retirement plan administrators on implementing mandatory automatic enrollment payroll deduction plans.
State Retirement Plan Legislation and Implementation
Research by groups such as the Pew Charitable Trusts and Georgetown University’s Center for Retirement Initiatives has shown that automatic payroll deduction is one of the most important success factors in retirement preparedness. As a result, states are mandating plans through legislation. In 2018, more than 40 states considered legislation. Mandates in active development include California, Connecticut, Hawaii, Illinois, Massachusetts, Maryland, Oregon, and Washington. New Jersey recently enacted the Secure Choice Savings Program.
APA met with plan administrators from California, Illinois, Maryland, and Oregon in February to discuss the status of their plans. California began a pilot program in November 2018 and plans its first phase for employers with 100 or more employees in June 2020. Illinois will begin a second phase in July 2019 for employers of 100 to 499 employees. Maryland plans its start date later in 2019. Oregon is unveiling its fourth phase in May 2019 for employers with 10 to 19 employees.
APA Concerns
Of concern for APA is ensuring that states use definitions from existing laws that are already well-understood by employers and addressing cross-state issues. These issues include how to determine eligibility for employees who live in one state and work in another, employees with a temporary presence in a state, and the role of employers regarding independent contractors and gig economy workers. APA also is working with plan administrators on technology issues. Ideally, states will have similar file formats in which all payroll management programs can transmit data.
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