NAIFA members in Washington state and across the country have dedicated their careers to ensuring their clients are well-prepared for retirement. Financial professionals offer a robust variety of products and services, working with employers and employees, alike, to provide retirement security options.
NAIFA believes more needs to be done to encourage retirement planning and governments can play a meaningful role. However, plans to create state-run automatic enrollment individual retirement savings account programs, like one under consideration in Washington state, are not the answer.
NAIFA member Mark Ingersoll told the state House Committee on Consumer Protection & Business that the legislation, WA HB 2244, is not the best way to encourage Washington residents to prepare for retirement and could cause unintended harm. Drawbacks to state-run programs launched in other states include:
- Most eligible employees opt out of the programs and those who participate tend to contribute very small amounts.
- Participants are likely to make early withdrawals that could result in penalties.
- Participants do not benefit from the assistance of licensed financial professionals who are required to assess their clients’ specific life factors and goals and work in their best interests.
- State-sponsored plans may reduce the incentive for employers to provide plans.
- Plans in place in California, Oregon, Illinois, and Connecticut have not met projected goals, seem unlikely to reach self-sustainability, and will require continuous state funding to remain operational.
Ingersoll said lawmakers should reject the current proposal and instead focus on private-sector solutions available through multiple employer plans, which are now more accessible for employers to adopt due to the recently enacted federal law, SECURE 2.0.
The Washington legislature could encourage retirement planning in other ways, such as:
- Supporting legislation that makes financial literacy education mandatory to graduate high school (HB 1915/SB 5819).
- Requiring employers to notify and refer interested employees to a certified financial planner.
- Promoting efforts to encourage employers to utilize the benefits of the federal SECURE Act.
NAIFA is the only association of insurance and financial professionals with strong advocacy influence in every state capital. We will remain engaged with lawmakers in Washington and other states considering or implementing state-run programs.