- Add Washington to the list of states that are considering legislation affecting the marketplace for private retirement plan products. Washington State Rep. Larry Springer (D-Kirkland) has introduced a bill to create a “small business retirement plan marketplace” with the goal of “removing barriers to entry into the retirement market for small businesses“
The legislation establishes a program that creates a retirement plan product clearinghouse that will only be available to Washington employers with fewer than one hundred employees, self-employed individuals, and sole proprietors that do business in the state. The bill dictates the types of retirement plan products and investment options that would be allowed to be offered in the clearinghouse. For instance, the marketplace must approve at least three types of plans for eligible employers participating in the marketplace to use:
1. a SIMPLE IRA plan;
2. a payroll deduction IRA program; and
3. a MyRA (President Obama’s new Roth IRA program).
As for the investment product options within the SIMPLE or payroll deduction IRA plans, the legislation suggests that the arrangements include at least two target date fund options and two balanced fund options (the sole investment option in the MyRA is a bond backed by the U.S. Treasury).
Participation in this new clearinghouse is completely voluntary by both the retirement plan product providers and the eligible Washington employers. However, the legislation requires the director of the clearinghouse to develop marketing materials about the clearinghouse and its products to be distributed through Washington state government entities such as the Department of Revenue, the Department of Labor and Industries, the Employment Security Department, the Office of Minority and Women’s Enterprises, the Department of Licensing and the Secretary of State’s Division of Corporations. The bill envisions state appropriated funds and program fees to be used for this purpose.
The author of the legislation seems to think that a distribution channel for retirement plan products for small businesses does not currently exist in the marketplace and so the Washington state government needs to create one. But by not explicitly including 401(k)s or other qualified employer-sponsored arrangements other than SIMPLE plans in the clearinghouse, the bill needlessly limits the private retirement product options in the marketplace that are currently available to small employers in the Evergreen State.
Andrew Remo is the Congressional Affairs Managers for NAPA and ASPPA.
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