Six U.S. states, led by Massachusetts and California, are taking steps to put public pension overseers in charge of retirement savings plans offered to nongovernment workers, according to an advocate of the idea.
Massachusetts, California, New York, Florida, Ohio and Connecticut have made or are actively considering such moves, said Hank Kim, executive director of the National Conference on Public Employee Retirement Systems, a trade group in Washington that backs letting government fund managers control retirement plans set up for nonprofit organizations and small businesses.
“It’s beginning to be acknowledged that while the 401(k) is part of the private-sector retirement puzzle, it cannot be the only part,” Kim said during a meeting of the Information Management Network’s Public Funds Summit near San Diego.
Under a “secure choice pension” proposal from Kim’s organization, workers would be required to save 6 percent of their incomes in retirement plans, to be managed by public pensions. Participants couldn’t withdraw their assets under normal circumstances before reaching age 65. The plan assumes an average annual return on invested assets of 7 percent.
Kim said the idea wouldn’t “dramatically” change private management of retirement funds, since the new savings would supplement existing plans rather than replace them.
Last week, Massachusetts Governor Deval Patrick, a Democrat, signed a bill empowering the state treasurer to manage retirement-savings plans set up for employees of nonprofit organizations with fewer than 20 employees, according to a statement from his office.
Last month, California Senate President Pro Tem Darrell Steinberg, a Sacramento Democrat, and Senator Kevin de León, a Los Angeles Democrat, introduced a proposal to let the California Public Employees’ Retirement System and other fund managers oversee individual retirement accounts set up by nongovernment organizations and businesses.