The White House wants more states and cities to set up automated retirement plans

Source: AP
Source: AP

At the White House Conference on Aging in July 2015, President Barack Obama called on Secretary of Labor Thomas Perez to create a roadmap for states to make it easier to set up their own retirement plans. 

On Thursday Perez announced the new rules, joined by Director of the National Economic Council Jeff Zients, which also include a new measure that would allow some large cities and municipalities like New York City to set up their own automated retirement accounts as well. 

The move builds on a number of White House initiatives aimed at making saving for retirement easier for people who don't have an employer-sponsored account: Workers who are automatically enrolled in their plans are 13 times more likely to save, Perez explained in a Thursday morning press call.

So far, eight states including California have passed laws creating their own state-provided retirement plans. 

Most, like California's Secure Choice Retirement Plan, are set up like a common employer provided 401(k).

Under California's plan, businesses with five workers or more can enroll their employees in a state plan, who will begin to have 2% to 5% of their paychecks automatically deducted and put into the state's retirement plan. 

California is one of eight states in the process of passing laws that would set up state-provided retirement plans.
Source: 
Rich Pedroncelli/AP

The new rules are aimed at protecting states from concerns that their plans could be pre-empted by the federal Employee Retirement Income Security Act. They also include some new protections for consumers, such as requiring that employees can opt out if they want to. 

"We think that's important," Perez told reporters.

Making it easier for more people to save for retirement has been a key priority for Obama, who has proposed automatically enrolling American workers without access to a workplace retirement account in an IRA in every budget since taking office. 

And in April, the administration reached an agreement with the financial services industry over new changes to the "fiduciary rule" which requires that advisers act in their client's interests. 

However, one-third of Americans still have no retirement savings at all, often because their employer doesn't offer a program with automatic enrollment. 

"A workplace retirement vehicle is an indispensable pillar of retirement," Perez said on the call, explaining why so many people could be unable to retire comfortably. "We need to help them."

How likely are you to make Mic your go-to news source?

James Dennin

James is a staff writer covering money and millennials. Send your tips and your money problems to jdennin@mic.com.

MORE FROM

Why the new Senate health care bill could make your insurance more expensive

As many as 22 million people could lose their insurance coverage if the Senate's Better Care Reconciliation Act of 2017 makes it into law, and out-of-pocket costs could also rise.

These 10 chill gigs offer high pay and low stress

Workers in certain low-stress professions actually earn higher-than-average wages.

Can computer games improve diversity in hiring?

Will playing games get you your dream job? Unilever thinks so, with a new class of hires recruited using a series of online games.

Here's the secret to hitting "pause" on your debt

Get rid of debt more easily by getting a 0% balance transfer credit card, trying out new financial management apps, and turning to traditional debt consolidation tactics.

Top telltale signs your student loan "relief" company is a scam

Student debt relief or loan servicing companies may sometimes have shady business records. Here's how to tell if a firm is real — or a scam or fraud.

5 classes you've never heard of — but that can boost your pay in the future

To earn high pay, these are the best classes to take, as traditional industries face existential crises and new lucrative fields of study emerge.

Why the new Senate health care bill could make your insurance more expensive

As many as 22 million people could lose their insurance coverage if the Senate's Better Care Reconciliation Act of 2017 makes it into law, and out-of-pocket costs could also rise.

These 10 chill gigs offer high pay and low stress

Workers in certain low-stress professions actually earn higher-than-average wages.

Can computer games improve diversity in hiring?

Will playing games get you your dream job? Unilever thinks so, with a new class of hires recruited using a series of online games.

Here's the secret to hitting "pause" on your debt

Get rid of debt more easily by getting a 0% balance transfer credit card, trying out new financial management apps, and turning to traditional debt consolidation tactics.

Top telltale signs your student loan "relief" company is a scam

Student debt relief or loan servicing companies may sometimes have shady business records. Here's how to tell if a firm is real — or a scam or fraud.

5 classes you've never heard of — but that can boost your pay in the future

To earn high pay, these are the best classes to take, as traditional industries face existential crises and new lucrative fields of study emerge.