The latest state-sponsored initiative to mandate retirement savings has been introduced by 14 lawmakers in Kentucky's House of Representatives, 13 of whom are Democrats.
The Kentucky Retirement Account Program would automatically enroll workers in a Roth IRA and defer a minimum of 3 percent of earnings per pay period.
Employers with five or more employees would be required to participate. Employers with fewer employees that have been in business more than two years would be allowed to voluntarily participate.
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The program would be designed and overseen by the State Treasurer's office, which would be required to contract with an outside third-party administrator. The program would be designed around one default investment fund, a life-cycle target-date fund, but would allow a range of other investment options, according to the proposed legislation.
The law instructs the governing board to establish a website offering private sector providers of investment options that workers can choose as an alternative to the Roth options offered by the state.
No state official or member of the oversight board will be a named fiduciary, and will therefore not be liable for investment performance.
Nor will participating employers be considered fiduciaries, or liable for the funds' performance.
Employers would have the right to apply for a hardship exemption, provided they're able to prove that participation would cause and "irrebutable presumption of actual hardship," according to language in the proposal.
The bill says the program will begin 24 months after enactment of the law, but will be subject to funding requirements and compliance with the Employee Retirement Income Security Act.
Funds in the accounts would be prohibited from being comingled with other state funds.
Illinois recently signed into law its automatic retirement program, the first state to pass such an initiative.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
