On Thursday, the Labor Department unveiled a rule that should make it easier for states to launch their own retirement plans for private-sector workers who don’t already have access to savings accounts through their jobs. The rules, which were requested last year by President Obama, provide a clearer road map for states who want to provide such plans but needed more federal guidance. The department also announced a proposed rule that would open the door for large cities to create their own plans.
“Too many Americans reach retirement age without enough savings to supplement their Social Security checks,” said Jeff Zients, director of the White House National Economic Council. “Today we are taking a major step toward ensuring that every American can save for retirement at work.”
With the new guidance, states that create their own plans will be able to automatically enroll workers into individual retirement accounts (IRAs). Workers will also be able to have their contributions automatically deducted from their paychecks, an option that is not usually available for people saving for retirement outside of a workplace plan. Employees typically gain access to these easy saving strategies when they have retirement plans at work, such as a 401(k) plan.
But because the retirement accounts are IRAs and not 401(k)s, savers would not have some of the other benefits that workers with a workplace plan might receive, such as matching contributions from their employers.
