States Helping Private Sector Employees to Save Towards Retirement Benefits

June 25, 2016

Saving towards retirement benefits has become a huge concern for public sector employees as well as private sector employees. As private sector employees have got fewer options for retirement savings, the states are thinking about adopting some methods to ensure that the employees get access to more retirement saving options. Many of the state governments are adopting 3 crucial approaches as per the information shared by Pew Research.

Why there is a Need for Better Retirement Benefits Options?

The information shared by Pew Research indicates that most of the private sector employees accumulate a hefty part of their retirement funds in the plans that are employer-sponsored. It also mentions that just 58 percent of employees have access to a retirement savings plan and just 49 percent participate in a plan. Only fewer than 10 percent of all workers are contributing to a retirement plan that’s not job-based. It is pertinent to add here that the failure to save or save enough for retirement has a negative impact on the life of workers later in life.

Seeking the Right Programs

To help the private sector employees, several states are seeking programs that would help private sector employees to save for their later years. Pew Research analyzed the efforts made by 25 U.S. states and found that the objectives of all these states were consistent.

The states seeking programs that aim to increase the retirement savings and reduce poverty among retirees so that the social assistance spending that is straining the budget can be reduced. The policymakers also want to ensure that the new programs have the potential to be implemented successfully, that are sustainable and cost effective. The programs must also place minimal burden on an employee and protect the retirement savings.

The Three Vital Programs

The states are taking help of three approaches. The first approach is to administer and sponsor a plan that is governed in accordance with and under the Employee Retirement Income Security Act (ERISA). The next option is to work within the existing voluntary employer-based system and the final option is to create a state-based plan that is not subject to any federal pension law.

It is a fact that all of the above-mentioned approaches have the potential to help the private sector employees to get better retirement savings options and hence they would have access to better retirement benefits after they retire.