401(k) Specialist Issue 2 - 2023 - 30

State-Mandated IRAs
Not
Crowding Out
Private 401(k)s
Recent research shows the wave of state-based retirement plan
initiatives continue to complement-not erode-private market plans
By Brian Anderson
W
To date, that hasn't been the case. A
report released in April from the Pew Charitable
Trusts, building on research from a
Dec. 21, 2022 Pew report, finds that instead
of enrolling their employees into mandated
state options, many companies are choosing
instead to start their own 401(k) plan.
Citing federal data for 2021, the Pew report
shows that implementation of state-facilitated
retirement savings plans for private sector
workers without workplace plans is actually
having a positive impact on the creation and
retention of private plans.
The report says businesses in California,
Illinois, and Oregon-three of the first states
30
ISSUE 2 2023 | 401kSpecialist.com
When some states started mandating that
companies offer retirement plans or be required
to auto-enroll employees into state-sponsored
IRA programs, there was plenty of concern that
it would prompt some companies to terminate
existing 401(k) plans and go the state route.
to launch state-mandated plans-continued to
create new private 401(k) plans in 2021 at rates
similar to or exceeding those in states without
such programs.
It seems the private retirement plan market
has in fact treated the introduction of state
mandates as an opportunity to spur new
business.
In 2021, the Pew report found California
still had a higher rate of retirement plan
creation than the national average, and the
state's share of new plans remained among the
highest in the country. California experienced
a 16% increase in new 401(k) plans from 2019
through 2021, compared to 2013 to 2018. The
state officially started its CalSavers Retirement
Savings program in 2019.
" At Plan Design Consultants we have
been in the startup game for over 40 years,
but this might very well be the best time
ever to be a provider of new 401k plans, " said
company CEO-President J.D. Carlson, also of
Retireholics fame.
An April 14 article in The Wall Street Journal
on the subject noted that Carlsbad, Calif.-based
Plan Design Consultants said its sales of firsttime
plans in California rose 60% in 2021 and
35% in 2022.
" When you look at the growth we had
in terms of new startup plans in 2021 and
2022, you can't deny the impact of CalSavers
as that played a big role, but our marketing
efforts and the hard work of our sales
team can't be overlooked either, " Carlson
told 401(k) Specialist.
" 2023 is off to another phenomenal start
for us, so the momentum is still very strong.
Even with new California mandates for
employers with 1-4 employees, I think the

https://401kspecialistmag.com/major-state-sponsored-retirement-plan-launched/ https://www.retireholics.com/ https://www.wsj.com/articles/millions-gain-access-to-401-k-s-as-more-small-businesses-launch-plans-7584a9b7 https://www.pewtrusts.org/en/research-and-analysis/articles/2023/04/14/state-automated-retirement-savings-programs-continue-to-complement-private-market-plans https://www.pewtrusts.org/en/research-and-analysis/articles/2023/04/14/state-automated-retirement-savings-programs-continue-to-complement-private-market-plans https://401kspecialistmag.com/state-ira-programs-boost-private-401k-plan-adoption/ http://www.401kSpecialist.com

401(k) Specialist Issue 2 - 2023

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