I\u2019m generally not a big fan of government mandates. In the retirement plan business, however, it\u2019s hard to argue with results when a mandate actually accomplishes what it was designed to do.<\/p>\n
New research from Gusto shows just how much retirement plan coverage among small businesses has improved since 2019. The share of small businesses with active retirement plans has increased dramatically, with millions more workers now having access to retirement savings through work.<\/p>\n
That\u2019s a good thing.<\/p>\n
SECURE and SECURE 2.0 deserve some credit. Congress increased tax incentives for small employers to establish retirement plans and tried to remove some of the obstacles that made offering a plan less attractive.<\/p>\n
But I think state retirement plan mandates deserve a lot of credit too.<\/p>\n
States essentially told employers that they needed to offer employees some type of retirement savings opportunity. Employers could use the state IRA program or establish their own retirement plan.<\/p>\n
Guess what happened? A lot of employers established plans.<\/p>\n
Gusto\u2019s research found substantially greater growth among very small businesses in states with Auto-IRA mandates than in states without them. That\u2019s important because small employers have historically been where the retirement coverage gap has been the greatest.<\/p>\n
I\u2019ve never believed that the state-run IRA programs themselves were necessarily the greatest retirement product ever invented. That\u2019s almost beside the point.<\/p>\n
Their greatest accomplishment may be forcing employers to finally make a decision.<\/p>\n
For years, we talked about America\u2019s retirement coverage gap while millions of employees had no workplace retirement savings opportunity. State mandates, combined with federal tax incentives, actually moved the needle.<\/p>\n
There is still plenty of work to do. Access doesn\u2019t guarantee that employees will save enough for retirement.<\/p>\n
But you can\u2019t save through a workplace retirement plan you don\u2019t have.<\/p>\n
More coverage means more people have an opportunity to save.<\/p>\n
That\u2019s progress, and that\u2019s a good thing.<\/p>\n
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