A new state retirement plan – for private employees?
A bill filed last month (H.4258) would create a state retirement plan for private employees. The 401(K) style plan, called the “Palmetto Work and Save Plan”, would be available for employees of private businesses, non-profits, and even those who are self-employed. However, individuals who work for private businesses would be automatically enrolled unless they opted out, and the default employee contribution would be 6% of the individual’s paycheck.
The plan would be maintained and overseen by the Treasurer’s Office. This also means the treasurer would have ultimate discretion over investment decisions and the hiring of investment managers.
The bill would also create a fund to cover the administrative costs of the plan. The main source of revenue for the plan would come from participant contributions. However, the bill stipulates that the fund can receive appropriations from lawmakers, grants, and even donations from the public. The bill would also allow the treasurer to accept a loan from the state to facilitate the start-up of the plan. After this, however, the plan must be self-sufficient.
Finally, the bill maintains that the state cannot guarantee a rate of return, is not responsible for monetary loss, and cannot be held liable for debts incurred by the plan.
It is unclear why lawmakers would propose a state-administered retirement plan when such programs already exist through private businesses. Moreover, the automatic enrollment of individuals – and assigning them a contribution rate – is a highly troubling policy, as is the potential for using tax dollars to initially fund components of the plan – particularly given the $81.9 billion deficit in the state employee pension plan.
The bill has yet to be scheduled for a committee hearing.