At the end of April, the New York City Council took a bold step and approved a city-sponsored retirement plan for private-sector employees who do not have retirement coverage at work, creating the city’s first ‘auto-IRA’ (individual retirement account). SCEPA’s Retirement Equity Lab, which testified in support of the policy, estimated the New York auto IRA plan will provide coverage to 2.8 million city workers that today have none.
Mayor de Blasio signed the bill last week implementing the city’s auto-IRA program.
The NYC Auto IRA Bill Is Well- Designed
Employers with more than five employees will have to automatically deduct a percentage of their workers’ pay and forward it to city-facilitated, not-for-profit IRAs. (Employers with less than five employees, self employed, and gig workers need to voluntarily join.) Auto IRA account’s are individually-owned and professionally managed, and administered by an independent board headed by city-appointed trustees. While employers are required to participate, employees would have the right to change their contribution rates or opt-out of the program. The plan is also portable; participants can maintain their accounts when they change jobs.
Author(s): Teresa Ghilarduci
Publication Date: 19 May 2021
Publication Site: Forbes
The multiemployer pension crisis was not caused by poor decisions by the pension funds. Factors out of their control: recessions, government decisions, industry deregulation (trucking for example) and quirks in the pension regulation law, ERISA are responsible. Some, including the New York Times blame the pension actuaries for high rates of return assumptions, but for most of their existence, the plans were much more conservatively run than high-flying single corporate plans.
Because of deregulation, bankruptcies of major carriers, and the 8-year policy of the George W. Bush administration to avoid contracting with union carriers, the Central States pension fund did not have enough money to pay Jack. The 2007 financial crash, caused by inadequate government regulation, and the Pandemic recession, further accelerated the expenses in Jack’s pension fund, one of the largest multiemployer plans.
Government regulation also did not move fast enough. Unlike single employer plans where ERISA encourages the PBGC to step in and take over the plans before the sponsors end up in bankruptcy there is no pre-crises help from the government agency, the PBGC, for multiemployer plans. Not acting quickly the aid needed soared. If the aid came 12 years ago the expense would have been much smaller about $10 billion.
Author(s): Teresa Ghilarducci
Publication Date: 15 March 2021
Publication Site: Forbes