Hands off IRA plans for Illinois workers

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Republicans are scrambling to revive their effort to repeal and replace the Affordable Care Act. | Alex Brandon/Associated Press

Follow @csteditorialsIn a particularly feckless moment, the U.S. House of Representatives voted in February to make it harder for Illinois workers to save for retirement.

The Senate, if it cares more about workers than Wall Street lobbyists, should block this misguided effort.

Workers, especially those employed at smaller companies, routinely do not save enough for retirement. Half of all workers in the private sector are not offered a retirement savings plan by their employer, and few save sufficiently for retirement on their own. One in four Americans, by one reliable estimate, has less than $1,000 in retirement savings.

As workplace pensions have disappeared, the retirement crisis has exploded. And retired people who have no nest egg are far more likely to need public services such as food stamps and Medicaid, which burdens taxpayers.

Illinois, along with four other states, stepped into this breach in the last two years by creating automatic state-sponsored IRAs for workers who don’t have other options through their jobs. Under the plans, which have yet to go into effect, 3 percent of each paycheck would automatically be placed in a retirement a fund administered by a private-sector firm.


Follow @csteditorialsEmployers would not be required to match these contributions, nor would taxpayers be on the hook if the returns were disappointing. Workers could freely opt out. But the AARP says people are 15 times more likely to save if contributions are deducted directly from their paychecks. The idea originally was suggested by the conservative Heritage Foundation and centrist Brookings Institution.

Congress has a problem with this. The same Republicans who insist the federal government shouldn’t tell the states what they cannot do now want to tell the states, in this case, what they cannot do. Already, both the House and Senate, in nearly party line votes, have voted to block cities from creating such IRA plans.

The state-sponsored IRA plans are opposed by some in the financial industry, who don’t care for the possible competition. Their official line is that they worry the state plans won’t have the federal protections that, for example, a 401(k) does.

That’s a red herring. The danger is not that workers’ savings won’t be protected. It is that workers will have no savings at all.

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