State of Minnesota may soon control your retirement savings
Earlier this week, House and Senate conferees agreed to final language for the Women’s Economic Security Act (WESA). While most of the attention has focused on the bill’s family and sick leave provisions, one particularly bad policy provision has attracted little attention. Specifically, WESA lays the groundwork for a “state-administered retirement savings plan” for employees in the private sector. Yes, this would essentially be a government-run retirement plan controlled by the State Board of Investment. The ramifications of such a plan could be devastating for private sector employees as well as taxpayers who would likely be on the hook for future bailouts.
The bill states: “the commissioner of management and budget must report to the legislature…on the potential for a state-administered retirement savings plan”, by January 2015. The legislation includes $400,000 to study the issue. While a legislative report may seem innocuous (albeit expensive), it is anything but. This is the proverbial camel’s nose under the tent.
Earlier this session, liberal legislators and special interest groups introduced the Minnesota Secure Choice Retirement Savings Act, which was subsequently scaled back to what is now a $400,000 study. As Watchdog.org reported on that piece of legislation: “If the state gets in the business…opponents warn the livelihoods of some 140,000 Minnesotans in the finance and insurance industry would be anything but secure. They also caution that taxpayers would be on the hook for a bigger bureaucracy and potential bailout, if and when the market tanks.”
In addition, employers would likely scale back or eliminate existing retirement and pension plans, since a “public option” would be available to employees, just as Obamacare is causing some employers to stop providing health insurance. The legislation acknowledges as much, stipulating that the commissioner look at “options discouraging employers from dropping existing retirement savings plans in favor of a potential state-administered plan.”
According to the National Conference of State Legislatures (NCSL), there is little precedent for what Minnesota is about to do. In September 2012, California became the first state to enact similar legislation, the California Secure Choice Retirement Savings Trust Act. (Incidentally, California already has arguably the most dysfunctional public pension system in the nation.) The California law requires any business with 5 or more employees to withhold 3 percent of each employee’s compensation, and send it to the state-controlled investment board. Employees who do not want the government to control their retirement plan must actively opt out of the system.
It is, in short, the Obamacare of pension plans: a radical expansion of government that is coercive, expensive, and economically reckless. And it is quietly being imposed here in Minnesota.
Posted on Thu, May 8, 2014
by Jonathan Blake