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Old 05-23-2014, 06:14 AM
 
Location: Central Massachusetts
4,800 posts, read 4,844,519 times
Reputation: 6377

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Illinois retirement bill could serve as model for other states | LifeHealthPro


The above link is so short I quoted the whole article here. The original story is here House Committee Passes Retirement Security Bill - AARP Urges Full House To Follow Suit.


Quote:
Given the looming retirement crisis in the U.S., more states need to give serious thought to following Illinois’ lead. If enacted, State Senate bill 2758 would allow businesses with 25-plus employees and that have been in existence for more than two years to sponsor individual retirement plans without having to comply with federal ERISA requirements. As the savings accounts would be based on employer and employee contributions, the legislation is not likely to meet with the same industry resistance as a California State Assembly bill did last year. That legislation would have created guaranteed, state-funded retirement plans for California private sector workers — leaving taxpayers in the state on the hook for any resulting shortfall.
The idea to me sounds like a good one. Some I know will argue that it is just not enough but I disagree. Posting it here as well is important as it will be seen by a number of people. It is very important as voters that we make our elected officials work for us. It would seem that at least in Illinois that they are doing something for their money. Any time we can educate people about preparing for their future is a boon to all of us as it will mean less of their support will come from tax payer funds. That will put less of a strain on all of us.
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Old 05-23-2014, 07:05 AM
 
Location: Great State of Texas
86,093 posts, read 72,479,637 times
Reputation: 27565
California passed a similar bill in 2012.
It's called California Secure Choice. While the bill passed it's still being designed and has not been implemented yet.


SCIB
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Old 05-23-2014, 07:19 AM
 
Location: Great State of Texas
86,093 posts, read 72,479,637 times
Reputation: 27565
Given the choice though people should choose to open their own IRA with a brokerage firm IMHO.
There's a common theme running with these State and Federal run programs...pooling the money, having it managed by the State or Federal Treasury and pegged to Treasuries.

We gave them FICA for so many years and the Trust Fund is full of non-negotiable Treasuries now because Congress "borrowed" money to pay other bills.

Why wouldn't states start to do that as well ?
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Old 05-23-2014, 07:40 AM
 
Location: Central Massachusetts
4,800 posts, read 4,844,519 times
Reputation: 6377
Quote:
Originally Posted by HappyTexan View Post
Given the choice though people should choose to open their own IRA with a brokerage firm IMHO.
There's a common theme running with these State and Federal run programs...pooling the money, having it managed by the State or Federal Treasury and pegged to Treasuries.

We gave them FICA for so many years and the Trust Fund is full of non-negotiable Treasuries now because Congress "borrowed" money to pay other bills.

Why wouldn't states start to do that as well ?

I do not believe that the Illinois bill is another FICA or even a state managed fund or family of funds. I beleive it just opens up the regulation that allows employers to skip some of the requirements to starting the funds. It is easy enough to check but as it was reported so far that is all the legistlation is set to do. Just make it easier for businesses to start 401k's.
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Old 05-23-2014, 07:47 AM
 
Location: Central Massachusetts
4,800 posts, read 4,844,519 times
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Quote:
Originally Posted by HappyTexan View Post
California passed a similar bill in 2012.
It's called California Secure Choice. While the bill passed it's still being designed and has not been implemented yet.


SCIB

Reading the link you provided it would seem that CA is at least trying to address the situation as well. The issues they are running into is that the law prohibits them from using tax payer money to investigate investments. I can see the reasoning and that is a flaw in how the CA bill is written. I do not beleive the IL bill is trying to mandate what investments that employers use. It just is set to cut through the red tape so to speak.
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Old 05-23-2014, 09:51 AM
 
29,774 posts, read 34,856,103 times
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Quote:
Originally Posted by HappyTexan View Post
Given the choice though people should choose to open their own IRA with a brokerage firm IMHO.
There's a common theme running with these State and Federal run programs...pooling the money, having it managed by the State or Federal Treasury and pegged to Treasuries.

We gave them FICA for so many years and the Trust Fund is full of non-negotiable Treasuries now because Congress "borrowed" money to pay other bills.

Why wouldn't states start to do that as well ?
Yeah, lots of creative ways to get people to fund government.
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Old 05-23-2014, 10:58 AM
 
Location: Great State of Texas
86,093 posts, read 72,479,637 times
Reputation: 27565
Quote:
Originally Posted by golfingduo View Post
I do not believe that the Illinois bill is another FICA or even a state managed fund or family of funds. I beleive it just opens up the regulation that allows employers to skip some of the requirements to starting the funds. It is easy enough to check but as it was reported so far that is all the legistlation is set to do. Just make it easier for businesses to start 401k's.
It is state managed in that all the money goes to the state Treasurer and then an appointed Board decides where to invest it. They need that pooled money in order to do anything.

It's not like your payroll deduction will go to Fidelity to be invested in the mutual fund of your choice.

That money goes to the state and the state will invest it for you.

Payroll deduction going to the state is the same as FICA going to the Fed.
"Gimme now and I'll give it back later".
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Old 05-23-2014, 11:36 AM
 
29,774 posts, read 34,856,103 times
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Quote:
Originally Posted by HappyTexan View Post
It is state managed in that all the money goes to the state Treasurer and then an appointed Board decides where to invest it. They need that pooled money in order to do anything.

It's not like your payroll deduction will go to Fidelity to be invested in the mutual fund of your choice.

That money goes to the state and the state will invest it for you.

Payroll deduction going to the state is the same as FICA going to the Fed.
"Gimme now and I'll give it back later".
Bada Bing and Illinois has done a marvelous job with their pension plan .
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Old 05-23-2014, 11:50 AM
 
Location: Baltimore, MD
3,745 posts, read 4,215,210 times
Reputation: 6866
Quote:
Originally Posted by golfingduo View Post
I do not believe that the Illinois bill is another FICA or even a state managed fund or family of funds. I beleive it just opens up the regulation that allows employers to skip some of the requirements to starting the funds. It is easy enough to check but as it was reported so far that is all the legistlation is set to do. Just make it easier for businesses to start 401k's.
No, it is not a 401K. Employers with 25 or more employees (consecutively for at least 2 years) would be required to enroll those employees who do not choose to opt out of the plan. It is similar to a Roth IRA and the employer must offer at least one target date fund (IIRC). I'm betting some employers will make sure that they never have 25 employees throughout the entire 2 years.

Of course, it is subject to the Feds finding that the plan is eligible to receive the same tax benefit as a regular Roth IRA and that the plan does not fall under ERISA. If the fed determines otherwise, the plan is dead.
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Old 05-23-2014, 02:48 PM
 
Location: Great State of Texas
86,093 posts, read 72,479,637 times
Reputation: 27565
Quote:
Originally Posted by lenora View Post
No, it is not a 401K. Employers with 25 or more employees (consecutively for at least 2 years) would be required to enroll those employees who do not choose to opt out of the plan. It is similar to a Roth IRA and the employer must offer at least one target date fund (IIRC). I'm betting some employers will make sure that they never have 25 employees throughout the entire 2 years.

Of course, it is subject to the Feds finding that the plan is eligible to receive the same tax benefit as a regular Roth IRA and that the plan does not fall under ERISA. If the fed determines otherwise, the plan is dead.
California passed their law in 2012 and hope they can implement it in 2015.
So far they have not gotten approval from the Fed on this.
12 other states are in the process of doing the same thing.

The payroll deduction goes to the state Treasury.
A board appointed by the state legislature will decide on the investments for that money.
It's supposed to be no cost or obligation at all to employers except to set up the payroll deduction.
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