Employers Oppose Private Sector State-Run Retirement Plans

East Granby, Conn. — April 1

A report published by the Retirement Advisor Council revealed strong employer objections to state-run plans such as those recently proposed by legislatures in California and Massachusetts.

Specifically, employers in focus groups voiced concern about the lack of transparency, customization and risk associated with these plans, and that assets will be siphoned off for other purposes. Employers also voiced a concern of lack of participant faith in the system and advisor involvement.

The report also cautioned that plan sponsors may not be as wary as they should about the prospect of federal rollbacks of maximum contributions to 401(k) plans, formulated in Internal Revenue Code section 402(g).

Many expect a regular increase to help their participants enhance retirement preparedness, the study said, and would be taken by surprise by a rollback of contribution limits.

The study also confirmed that plan sponsors devote considerable time and energy to their fiduciary duties and rely on professional retirement plan advisors to keep them informed of legislative and regulatory developments. Plan sponsor concerns over their inability to control either the government or the direction of financial markets strengthens the demand for advisors, the study suggests.

A qualified advisor, the study said, can be relied upon to influence and shape the regulatory agenda, to guide plan sponsors in the exercise of duties and to place plan participants on the proper path to retirement readiness.

The report is based on focus group discussions with employers from across the U.S. The research was conducted by EACH Enterprise LLC and commissioned by John Hancock Mutual Funds, MFS Investment Management, MassMutual Retirement Services and Transamerica Retirement Solutions.

Source: Retirement Advisor Council