Primum non nocere. First do no harm!

This caution is often attributed to the Hippocratic Oath – which actually guides physicians to: “abstain from doing harm.”  Yet for both plan sponsors and state legislators, it is wise advice.

Consider recent efforts by state legislators to resolve issues of retirement savings plan “access” or “coverage.” 

Unfortunately, their worries about workers who are not saving for retirement have led some to adopt legislation that may encourage plan sponsors to drop existing retirement savings plans. 

In a July 2017 report, LIMRA (Life Insurance and Market Research Association) found that 55% of surveyed employers said if a state-run plan were available, they are very or somewhat likely to stop offering their DC (Defined Contribution, typically individual account) plan and have employees enroll in the state-run plan.

LIMRA reports that Plan Sponsors’ fear of litigation is highly correlated to their willingness to discontinue a DC plan in favor of a state “solution.”

For many workers, this could cause significant harm because most of the proposed state “solutions” that might reduce a Plan Sponsor’s legal exposure are nothing more than access to a Roth IRA – an option that is already available today (directly or indirectly) to every American wage earner - in addition to their employer-sponsored plans.    

If the state-sponsored Roth IRA is found to be an ERISA plan, it is likely to be less valuable, have higher fees and trigger potentially greater legal liability to the Plan Sponsor than an offer of Roth IRA access via payroll deduction support as a voluntary benefit program. 

We encourage state legislators to first, do no harm.