State-run retirement plans should be a wake-up call for the retirement industry, with more than 80 million uncovered employees ready to start saving.
For the retirement industry as a whole, the establishment of these state-run retirement plans can be viewed two ways:
Let’s be honest; the the underlying message of state-run IRAs is a tacit implication that the retirement industry could and/or would not meet the needs of this particular market effectively. In many respects, that’s true; this is an industry built on aggregation and assets, and this micro market has neither.
However, when you look at the sheer number of individuals and businesses that are not currently offering a plan, perhaps it’s time to rethink the existing model and embrace the opportunity.
The existence of a Deparment of Labor safe harbor exempting these state programs from ERISA, originally put into place by President Obama, would have made it difficult for the retirement industry to compete. However, as of May 18th, President Trump has signed legislation eliminating the Safe Harbor.