Workers and families know how hard it is to save for retirement. Traditional pensions are largely a thing of the past, and tens of millions of workers do not have access to employment-based retirement plans. It’s a fact that people are most likely to save for retirement when they have the chance to do so at work, and too many people who have jobs, but not retirement plans, are being left out.
We have an opportunity in the president’s 2017 budget proposal to help states create new pathways to savings for those workers who don’t have the option of participating in a work-based 401(k). The budget request includes $6.5 million over two years for a state-based retirement plan demonstration project. States receiving funding will serve as laboratories and testing grounds for best practices in opening up savings opportunities to more workers, particularly independent contractors, part-time workers and others who traditionally don’t have access to a plan through their job.
This goes hand-in-hand with an Employee Benefits Security Administration rulemaking that will help states navigate the passage of state-based savings programs that protect workers and have the best chance of not running afoul of the Employee Retirement Income Security Act. As Secretary Perez wrote when President Obama directed the department to propose a rule in July 2015:
Time and again, President Obama has proposed legislation that would automatically enroll new workers in an IRA if they lack access to a 401(k)-type plan through their employer. And time and again, Congress has failed to act. If the federal government can’t move the needle, then we have to do everything possible to encourage innovation that’s already happening at the state level.
Supporting state-based savings programs will help more people prepare for a secure retirement. Another important proposal to expand access to workplace retirement savings opportunities will enable small businesses to come together and create pooled 401(k) plans, at lower cost and with less burden than going it alone. In addition, the president’s budget request includes funding to pilot innovative, more portable approaches to provide retirement and other important employment-based benefits.
Making sure that those participating in any retirement savings plan or IRA are getting advice that is in their best interest is just as important. In the coming months we will publish a final rule that will hold more brokers and advisers accountable for the advice they give to retirement clients. Financial education, savings opportunities and appropriate protections are how workers will achieve the sound retirements they deserve.
The broad recognition that the retirement world has changed, concrete steps to protect savings in this new universe, and efforts to open retirement plans to more workers have all intersected during the course of this administration. Today’s workers, employers, financial services professionals and federal regulators are at the forefront of the effort to secure America’s financial future. With sound strategy and bold action, we together can make sure all workers and families benefit from the financial engines that drive our economy and grow individual wealth.
Phyllis C. Borzi is the assistant secretary of labor for employee benefits security.