What’s going on in the states? The state Senates of Montana and Vermont are considering bills that would affect retirement plan coverage of teachers and employees whose employers don’t offer a plan.
Editor's Note: This feature in the NTSA Advisor provides a look at what’s going on in the states and the most recent developments in their activity to provide and enhance retirement plan coverage.
Missouri Senate Ponders Changes to Public School Retirement System
By John Iekel
A bill is before the Missouri Senate that would make changes affecting the way retirement benefits are calculated for certain members of the Missouri Public School Retirement System.
Assistant Senate Minority Leader Doug Beck (D-St. Louis) introduced SB 556.
Under current law, between July 1, 2001 and July 1, 2014, a member of the Public School Retirement System of Missouri with 31 years or more of service is to be provided normal retirement benefits with a multiplier factor of 2.55% of the member's final average salary for each year of the membership service.
SB 556 would modify this provision by removing the expiration date and by providing that the multiplier factor for the normal retirement benefits of certain members with creditable service would be as follows:
- 2.53% for those members with 31 years or more of service, but less than 32 years of service;
- 2.56% for those members with 32 years or more of service, but less than 33 years of service; and
- 2.6% for those members with 33 years of service or more.
Effective date. The measure would become effective Aug. 28, 2023 if it is enacted.
Status. SB 556 is now before the Senate Veterans, Military Affairs and Pensions Committee.
Vermont Close to Passing Mandatory State Auto-IRA Program
By John Sullivan
Vermont is the latest state to push for a mandatory auto-IRA for uncovered workers and is close to getting its wish.
The Green Mountain State’s Senate swiftly and unanimously passed the VTSaves public retirement initiative on Thursday, which was introduced with the support of AARP in March.
The bill, S.135, will now move to the House for debate.
Most Americans, including Vermonters, have inadequate personal retirement savings, State Treasurer Mike Pieciak and supporters said when introducing the bill, noting that 40% of Vermont private-sector employees work for a business that does not offer a workplace plan.
“Having access to payroll deduction makes people 15 times more likely to save, yet over 88,000 Vermont workers can’t save for retirement out of their regular paycheck,” Greg Marchildon, State Director for AARP Vermont, added.
VTSaves would be an auto-IRA program that provides employees not currently covered by a workplace retirement plan access to one “at no cost to their employers.”
Employers who do not already have a workplace retirement plan would be required to sign up, and their employees automatically enrolled in a Roth IRA with automatic payroll deductions. Employees could opt out of the program and always would have access to any principal they put into their IRA without tax or penalties.
“We believe that the VTSaves program will be transformational for Vermonters’ long-term financial well-being, providing them with the dignity and security they envisioned in retirement and may help them avoid having to rely on state and federal public benefits to get by,” State Treasurer Mike Pieciak said.
Twelve other states have enacted similar auto-IRA programs and report that 70% to 75% of eligible employees participate in the program with average annual contributions of approximately $2,000. Savers in those programs have already accumulated over $735 million in assets, Pieciak said.
“I am thrilled to work with legislators and advocates and the business community to offer that opportunity to Vermonters as well,” he concluded. “And it is not a moment too soon to get a program like this up and running.”
In 2027, the federal government will enact a revised “Savers Match” under SECURE 2.0 that will allow a federal match of up to $2,000 for lower-wage earners who are saving for retirement. Supporters say VTSaves would make tens of thousands of Vermonters eligible for this critical federal retirement incentive.
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