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The ‘Birth’ of a Notion?

The Windy City played host in the first week of November to a gathering focused on developing ideas to address America’s retirement savings challenge — but government-run solutions dominated the conversation.

At the conference, “Saving — America’s Challenge and Opportunity in the Twenty-First Century,” experts from Illinois and the United Kingdom relayed their experiences with government-run retirement savings programs for private sector workers, a program that not only raised the retirement age, but required businesses of all sizes not only to sponsor, but contribute to a retirement plan. Representatives from the British National Employments Savings Trust (NEST) program presented the details of the program to an enraptured audience that appeared eager to impose a similar program on this side of the “pond.”

State-based alternatives were also on the agenda of a panel discussion in which stakeholders, including Phyllis Borzi of the Department of Labor (DOL), presented their plans to implement the various pieces of legislation passed by California, Illinois and Oregon. These bills would require that private businesses over a certain size offer some type of retirement savings program for the benefit of their employees coupled with the creation of a state-based retirement product that could be used by businesses to fulfill the requirement.

As Borzi explained in the first session of the second day, the DOL plans to update their existing payroll deduction IRA regulations so that states can “avoid ERISA” in the creation of their state based retirement product offering. These new rules would take form of a proposed rule with a likely 60-day comment period after the new regulations are published by the end of 2015.

At the same time, Borzi also said that the DOL will issue “sub-regulatory guidance” that will provide assistance to the states so that they can also “embrace ERISA” with their state based retirement product offering if the states so choose. Unlike the “avoid ERISA” approach, the DOL’s “embrace ERISA” approach will be made effective immediately since the department is not issuing new regulations but merely interpreting the definitions included in existing ERISA law.

American Retirement Association Chief Executive Officer Brian Graff encouraged conference participants to not let perfection be the enemy of the good when it comes to states addressing the retirement plan coverage gap in the private workforce.

Andrew Remo is the American Retirement Association’s Director of Congressional Affairs.