Vermont poised to become latest state to set up retirement plan for small businesses

It would be the ninth state to pass legislation creating a plan, and differs from other states' auto-IRA and marketplace approaches.
MAY 22, 2017

Vermont will likely become the latest state to create a retirement plan for its small businesses, in a play to boost retirement savings by increasing the number of private-sector employees covered by a workplace plan. The Vermont legislature passed an economic-development bill, S.135, establishing the Green Mountain Secure Retirement Plan, a multiple employer plan available on a voluntary basis to employers with 50 employees or fewer. Vermont intends to implement the program starting in January 2019, said Tim Lueders-Dumont, policy director for Vermont's Office of the State Treasurer. Governor Philip Scott, a Republican, is expected to sign the legislation, Mr. Lueders-Dumont said. When signed, the bill will make Vermont the ninth state to enact legislation creating a state retirement program aimed at small businesses. California was the last state to enact legislation, in September 2016. That bill created an automatic-enrollment, payroll-deduction IRA (or, auto-IRA) program similar to those being set up in four other states (Illinois, Connecticut, Maryland and Oregon). The bill's passage comes amid a heated debate over the role of states in trying to close the retirement savings gap. President Donald J. Trump last Wednesday signed a resolution overturning an Obama-era regulation that encouraged states to set up auto-IRAs by providing guidelines to reduce states' legal liability. Vermont's MEP program, geared toward the more than 100,000 private-sector employees in the state who don't have access to a workplace plan, differs from these auto-IRA programs. A state-sponsored MEP will allow participating employers in Vermont to join one common 401(k)-type plan, rather than sponsoring an individual 401(k). Unlike with auto-IRAs, the MEP would be covered by The Employee Retirement Income Security Act of 1974, have the same contribution limits as 401(k) plans and allow for employer contributions. Employees would be automatically enrolled, but employer participation in the Vermont plan is voluntary. "From the perspective of the participant, it's a regular 401(k) plan," said Aron Szapiro, director of policy research at Morningstar Inc. Massachusetts is the only other state to date to have enacted legislation to create a state-sponsored MEP. The Department of Labor in 2015 issued guidance to encourage states to sponsor MEPs. But observers say the Vermont legislation goes further, because Massachusetts would only cover non-profit organizations when it goes into effect. Relaxing some of the employer requirements related to MEPs has figured into recent federal, bipartisan efforts to boost retirement-plan coverage. However, some observers such as Mr. Szapiro question whether voluntary MEPs will do much to boost retirement-plan access. New Jersey and Washington state have passed bills taking a different approach, by setting up retirement-plan marketplaces for small employers.

Latest News

Bridgewater's flagship hedge fund surges amid volatile markets
Bridgewater's flagship hedge fund surges amid volatile markets

The firm's flagship fund, which invests in stocks, bonds, currencies, and commodities, saw accelerated gains as some peers lost ground.

ICI floats '40 Act revamp to support middle-class wealth creation
ICI floats '40 Act revamp to support middle-class wealth creation

Policy proposal offers recommendations on dual-share class funds, semi-transparent ETFs, and expanded flexibility for closed-end funds to include private market assets.

Trump-induced turbulence tests 60-40 strategy's limits
Trump-induced turbulence tests 60-40 strategy's limits

With bonds failing to provide a safety net for steeply falling stock prices, many investors are letting go of their "set it and forget it" approach.

More workers dipped into their retirement savings last year, Vanguard finds
More workers dipped into their retirement savings last year, Vanguard finds

Sneak peek into annual defined contribution plan report shows average participant balances reached an all-time high amid rising equity markets.

Decades-old will leaves fate of late actor Gene Hackman's $80M fortune uncertain
Decades-old will leaves fate of late actor Gene Hackman's $80M fortune uncertain

The iconic actor's death alongside his wife, Betsy Arakawa, leaves pressing questions about what happens next to his assets.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies