The increasing enthusiasm that states have been showing for setting up their own private-employer retirement plans is creating "a delightful mess," in the words of Dorsey & Whitney lawyer Bob Seng.
By delightful, he meant it's great that policymakers at last seem determined to help the tens of millions of private-sector American workers with little or no money for retirement aside from their Social Security.
As for mess, well, that's self-explanatory. Just because the states want to help doesn't mean they know how to create an effective employee benefit plan. It also looks like it might not be that long before the country has 50 different versions of them.
If employers haven't been paying attention to what states are now up to, Seng added, it's time they start.
At least half of the states have been working on some sort of plan, as tracked by the Pension Rights Center, an advocacy organization for workers based in Washington. Generally, workers' contributions get deducted from their paychecks, like in a 401(k) plan, only the money goes into a government-sponsored plan.
Minnesota is looking at the idea. The Minnesota Management & Budget agency, the state's finance arm, owes the Legislature its conclusion on the feasibility of a state retirement plan for private-sector workers. The report is expected by March, according to an MMB spokeswoman, and may be released sooner.
One of the things that held back development of state plans until now is a federal law known as ERISA (the Employee Retirement Income Security Act), which goes back to the 1970s when some big employers went under and took their workers' pension money down with them.
In this law, Congress explicitly made it the employer's burden to make sure that the retirement benefits of its workers were protected. Now, when employers get sued over their employee benefits plans, which happens all the time, it's likely for a claim under ERISA.