Bloomberg Law
April 10, 2023, 9:30 AM

Congress Could Be Your Next Workplace Retirement Plan Sponsor

Austin R. Ramsey
Austin R. Ramsey

A steady rise in states considering guaranteed workplace retirement savings laws has revived a debate over the potential for federal government intervention in covering American workers whose employers don’t already offer 401(k)s.

North Carolina became the latest state last month to introduce a bill (H.B. 496) that would establish a savings tool akin to an automatic individual retirement account for private-sector workers. Nationwide, 16 states and two cities have passed state-sponsored retirement savings plans, according to the Georgetown University Center for Retirement Initiatives.

A bipartisan group of lawmakers on Capitol Hill, meanwhile, are preparing to re-introduce legislation that could skirt private-sector and state-run programs by setting up a federal government-sponsored auto-IRA that matches worker contributions with Treasury-backed funds. Growing Republican support for the bill makes passage this session a real possibility, proponents say.

Nearly half of working-age adults in the US—57 million Americans—don’t have access to retirement savings benefits at work, according to AARP. Since workplace retirement savings are widely considered the most effective way of generating livable retirement income, federal and state social safety nets could be overrun by a future influx of retirees.

A federally sponsored retirement program has the potential to upset a carefully maintained balance between public- and private-sector retirement savings in the US, critics say. The $14.8 trillion workplace savings industry that includes fund managers, recordkeepers, and benefits lawyers, couldn’t compete with Congress’ deep coffers and ability to set, maintain, and potentially usurp its own benefit laws, they claim.

“If the government is going to be subsidizing people participating in this program, there’s nothing in the bill that stops an employer from saying, ‘You know what, fine. We’ll let the government do it,’” said Brian Graff, CEO of the American Retirement Association.

Seeing Past ERISA

State-run programs were always intended to be a temporary, stop-gap measure to help workers save in lieu of a federal mandate, but the latest federal proposal backers say could be introduced “in the coming weeks” has stakeholders from both state-backed programs and the 401(k) industry on edge.

Like the 14 states that have established true auto-IRA programs, the Retirement Savings for Americans Act, first proposed last year (S. 5271), would require employers to sign their workers up for the program and maintain an up-to-date employee roll with federal regulators.

“It’s more difficult to see that enacted at the federal level,” said Angela Antonelli, executive director of Georgetown’s CRI. “It’s difficult enough sometimes at the state level.”

Sen. John Hickenlooper (D-Colo.) told Bloomberg Law he’s currently working to get more backing across the chamber.

“It’s an investment proposition,” said Hickenlooper, who’s joined by Thom Tillis (R-N.C.) as a co-sponsor in the Senate. “We’ve got to make it attractive and demonstrate how we’re gonna pay for it in a way that we can get bipartisan support.”

Unlike state initiatives, the federal proposal wouldn’t be blocked by venturing into territory traditionally governed under the Employee Retirement Income Security Act of 1974 (Pub. L. 93-406). Up-and-running state programs like CalSavers in California have had to battle back ERISA preemption claims, carving out a unique space by intentionally avoiding matching contributions.

The 2022 version of the Hickenlooper-Tillis bill would not only match worker contributions, but would be exempt from burdensome nondiscrimination testing and disclosure requirements employers face annually. Importantly, a board of investment decision-makers appointed by the White House wouldn’t be bound by strict fiduciary standards to which private-sector plans must adhere.

“When one party’s in control, investments would go one way,” Graff said. “When another party’s in control, they’ll go another way. That’s not good for a long-term investment strategy.”

A Lot to Lose

Critics of a federal retirement savings program have a lot to lose. State government-based programs have already generated nearly $750 million in assets for private-sector workers, according to the CRI.

“The state systems were always meant to be a stepping stone to a federal program,” said Teresa Ghilarducci, a labor economist, professor, and director of the Schwartz Center for Economic Policy Analysis at The New School for Social Research in New York.

The industry that exists solely to help private-sector employers navigate the complex world of ERISA shouldn’t be threatened by a federal program, Ghilarducci added. A federal auto-IRA is intended to supplement the private-sector 401(k) system, not replace it, she said.

Federal auto-IRA proposals date back more than three decades, but they were popularized by proponents such as Ghilarducci and Brookings Institution senior fellow Mark Iwry, who helped steer the Obama administration toward a nationalized retirement system that got sidelined when Democratic lawmakers instead chose to invest their political capital passing the Affordable Care Act.

State-level retirement initiatives have seen some broad-level support by Republicans that tend to balk at employer mandates. Delaware recently enacted auto-IRA legislation with nearly unanimous GOP support, and states such as Virginia have approved legislation in Republican majorities. Legislation in North Carolina is being sponsored by Republican representatives.

Ghilarducci said she believes the federal proposal legislation may be more popular than an earlier Biden proposal that would have mandated that US employers themselves sponsor retirement plans.

A federal program would pave the way to de-linking retirement savings from employers, improving retirement plan mobility as workers switch jobs, and creating new opportunities for independent contractors and gig workers to save, according to Ghilarducci.

Research released last week by Legal & General Group Plc says the American gig economy is expected to account for 73 million workers next year, more than half of whom claim they’ve struggled to access retirement and savings plans.

“You have a series of cohorts of people who are under-provided for,” said John Godfrey, director of leveling up at Legal & General in London. “If someone were to create a product that worked for retirement savings, you need to aim for these free-spirited people.”

Diego Areas Munhoz contributed to this report.

To contact the reporter on this story: Austin R. Ramsey in Washington at

To contact the editors responsible for this story: Rebekah Mintzer at; Genevieve Douglas at

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