This story was originally posted by Statelinean initiative of the Pew Charitable Trusts.

A slew of state laws and bills would allow small business employees to set up Individual Retirement Accounts (IRAs) through state-sponsored programs, allowing workers to save with automatic payroll deductions even when their companies do not offer this option.

This year alone, 17 states are considering bills that would give access to IRAs to workers whose employers do not offer such plans. Ten states have recently put plans in place or are in the process of putting them in place. State plans do not require employers to match contributions.

According to AARP’s Public Policy Institute, employees are 15 times more likely to save for retirement if they have automatic payroll deductions at work. But such plans don’t exist for about 55 million American workers, mostly in small or medium-sized businesses, according to AARP’s research, and that’s where states can have an impact.

“For employers who don’t offer their own plans, these help address many issues that are barriers,” said Angela Antonelli, executive director of the Center for Retirement Initiatives at Georgetown University in Washington, D.C. . out of the employer and connects employees to a vehicle to save for retirement.

“After COVID, with such a tight workforce and competition for workers, it becomes even more important,” she added. “It helps level the playing field in a very tight labor market and allows them to compete for workers.”

In 2019, California implemented one of the first state-sponsored IRA plans and the number of participants continued to grow. In December 2021, it hit a record with nearly 220,000 workers with an account.

According to the Center for Retirement Initiatives, ten states have automatic contribution plans, including California, Illinois and Oregon. Connecticut launched its program on April 1.

Colorado’s pilot program is expected to launch in October and will be fully implemented in 2023. Maryland’s pilot program is expected to begin in June, with the program expected to be fully operational next year, Antonelli wrote in an email.

Last year, Maine, New York and Virginia also launched programs.

In Pennsylvania, the state would provide regulatory oversight and contract with a private finance company to manage participants’ investments. State Rep. Michael Driscoll, a Democrat who co-sponsors the bill, said he first introduced it six years ago, when about two million Pennsylvanians didn’t have access to retirement plans.

Pennsylvania’s plan would apply to any business with five or more employees. Many large companies have automatic contribution plans and some even match their employees’ payroll deductions, Driscoll said, but the state-run program “would at least provide for some who don’t have what the big have”.

The main sponsor of the bill is State Rep. Tracy Pennycuick, a Republican. The programs are for workers who “fall through the cracks,” Pennycuick said in a phone interview.

Although there are many IRA products on the market right now, she said, it takes time for employers to sign up and run the programs. A state plan that takes care of administrative responsibilities, she said, could make the difference for small businesses in deciding whether or not to offer the programs.

But a report released last month by the Congressional Research Service noted that some fear state plans will replace existing employer-sponsored plans and the benefits that come with them.

Opposition has come from the insurance industry, which Driscoll said is worried about losing potential customers. Insurance companies are among the entities, along with financial institutions, that contract with companies to provide IRA plans to employees.

Bianca Alonso Weiss, head of state government relations for the National Association of Insurance and Financial Advisors, which has opposed state-run programs, said in an email that the group commercial “appreciates that the States are looking for solutions to encourage more retirement savings”. But Weiss noted that at least one research paper from the University of Pennsylvania, focused on Oregon, showed that in April 2020, more than 50% of state-run accounts were inactive or had a rate. 0% savings.

Additionally, she said, low wages and high worker turnover in small businesses limit what these programs can achieve.

But the same article found that if contributions declined in Oregon’s IRA plan in April 2020, it was likely due to job losses during the pandemic, not a failure of the program.

“Non-participation rates increase with local unemployment and industry earnings volatility, and employees in low-income sectors are more likely to indicate that they cannot afford to save when ‘they step down,’ the authors wrote. “And, in April 2020, we see a sharp decline in contributions that we attribute to job losses related to COVID-19 and economic uncertainty.”

A study by The Pew Charitable Trusts found that 80% of employers who participated in the program in Oregon reported no additional costs. Pew, which finances Statelinesupported state IRA programs in several states.

Additionally, other Pew research dating back to 2016 found that lower-paid, minority workers were the least likely to have an automatic retirement savings plan at work.

The federal government has also taken note of the lagging retirement savings rate in the country. This month, the US House of Representatives approved a bill to expand IRA coverage and change some of the rules governing the programs to benefit savers.

The Secure Act includes an automatic enrollment provision like those in state plans. It would also raise the mandatory age at which retirees must begin withdrawing their savings to 75 and provide a way for older retirees with few dollars saved to make larger “catch-up” contributions to their IRAs.

In Hawaii, insurance industry representatives, including the American Council of Life Insurers and the National Association of Insurance and Financial Advisors, testified against a similar bill during state Senate hearings in February.

The Hawaii Senate approved the bill, but a House panel amended the bill to make it entirely voluntary for workers, leading to uncertainty about the future of the bill.

The insurance industry appears to “have the ear of a number of influential lawmakers in the House,” Craig Kugisaki, an attorney for the state’s Labor, Culture, and the Arts Committee, wrote in a statement. E-mail.

Driscoll, the Pennsylvania lawmaker, said failing to pass an IRA bill for low-income workers is short-sighted because without retirement savings, seniors will have to rely on government-funded programs to live.

“If we don’t have a program like this now, the government is going to foot the bill in 30 years,” he said. “If we do nothing, a whole segment of the people of Pennsylvania will be on government programs. We want people to retire with dignity – that can help.