Last year, the Oregon Legislature created a task force to look into the possibility of creating a state-run retirement plan open to all working Oregonians. It did so rather than simply getting the state into the retirement business, though it should have been clear that the task force would recommend going ahead with the idea.
And so it has, or at least that’s the conclusion drawn in a draft of its final report to the 2015 Legislature. Too many Oregonians retire without the resources to live out their years in relative comfort, the report says. Too few employers offer retirement plans, and not all employees participate when given the opportunity to do so. The state should step in to take up the slack.
Bad, bad idea.
What the state envisions is a system in which employees are enrolled when they take a job. They may opt out, but if they do not their contribution will be automatically deducted from their paychecks. Employers would not be required to participate, though they would be responsible for enrollment paperwork.
It may sound good, but it loses its luster on closer inspection.
The task force does not discuss who will pick up the fees for a system in which a state board hires and oversees private fund managers. Fund managers are nice folks, to be sure, but they do not work for free.
The report touts the notion of portability of an account from job to job. Yet employees already have the ability to move money from one retirement plan to another without being charged taxes or penalties.
Nor does the report suggest what the impact of a state-run, automatic-enrollment system would be on privately offered retirement plans. Would private retirement plans be allowed to disappear without penalty? Or would employees who work for those companies be exempted from state enrollment?
We’ll agree with the task force on one thing: Too few Oregonians have enough cash stashed for a comfortable retirement. The solution, however, is not a state-run retirement system, but a better effort at educating our citizens and — perhaps — exploration of ways to assist small employers in setting up plans of their own.