Should New Jersey embrace portable retirement savings plans?

New Jersey may join a small list of states including Oregon and Vermont creating “portable IRAs,” or retirement plans you can take with you, even if you change jobs.

Under a proposed bill, employees who work for businesses with 25 or more workers would be automatically enrolled in a professionally managed retirement plan unless they choose to opt out.

The bill, S-2891, would create what’s called the “Secure Choice” retirement program, so workers without employer-sponsored retirement plans have an option to save for retirement. It’s sponsored by Jersey state senators Joseph Lagana, Troy Singleton, and Shirley Turner.

“The New Jersey Secure Savings Program will make available to private-sector employees a convenient and efficient way to save for their retirement,” said Lagana, (D., Bergen/Passaic), in a statement. “Access to retirement savings accounts through an employer is among the best ways to effectively save. The savings program will accomplish the goal of helping hardworking New Jerseyans prepare for their future without burdening our businesses.”

“The majority of American workers in the private sector do not have access to an employer-sponsored retirement plan, and this is especially true for low-wage workers,” said Singleton, (D., Burlington).

It’s too early to predict if it will pass. And it’s possible that business groups may oppose the bill, citing administrative costs.

The bill would allow employees to establish individual retirement accounts and contribute via automatic payroll deductions. The program would target the growing number of businesses that don’t provide retirement plans for their employees.

“There are so many people working right now, paycheck to paycheck, who do not have any money saved for retirement because they can’t afford to,” said Turner, (D., Mercer/Hunterdon). According to AARP, about 1.7 million people in New Jersey don’t have a vehicle to save for retirement at their jobs.

The devil, of course, would be in the details: The program would be overseen by a seven-member Secure Choice Savings Board, with members appointed by the governor, the Senate president, and Assembly speaker. The savings fund would be outside and apart from other state funds, and neither employers nor the state would have any liability for, or claim to, the fund.

Sounds ... vague and overly ambitious? How about just a simple menu of benchmark index funds that don’t have to be overseen by anyone? Save money -- and leave politics out of the fund selection and oversight.

Pennsylvania’s treasurer Joseph Torsella has proposed similar “portable IRAs" or multi-employer plans for the commonwealth. His idea has yet to gain traction, but that may change as the state’s population ages.

According to a Econsult Solutions report that Torsella commissioned, baby boomers are aging in Pennsylvania without sufficient savings. Aging demographics especially will be an issue in Pennsylvania, currently the seventh-oldest state in the nation, the report found. As of 2015, 2.2 million of the state’s 12.8 million residents, or 17 percent, were age 65 or older.

Projections from the Pennsylvania Independent Fiscal Office estimate that residents age 65 and older will increase to 3.1 million by 2030, or 23 percent of the state’s population.

Why do we need more savings vehicles? They offset money spent on entitlements.

Pennsylvania spent an estimated $702 million more in 2015 on public assistance programs because the elderly don’t have savings, Philadelphia-based Econsult found. Absent any new savings, those numbers are projected to grow by 2030 to $1.1 billion in extra spending and $6 million in lost revenue, according to the study.

Would you take advantage of a portable IRA if your employer offered it? Let us know!

Steve Wittenberg, director of legacy planning for SEI Private Wealth Management, gave us the following nuggets on what he’s hearing so far this year from clients.

The reality of the tax reform’s impact is causing a stir, as initial average refunds come in lower this tax season. This may create upset feelings that tax reform did not really benefit taxpayers as a whole, he said.

A ripple effect? Taxpayers are engaging in more income tax and estate tax planning, based on fear that laws will be reversed soon or with the next administration. The Democrats took back the House and many Republicans are not sure if they’ll continue to support the president.

Complications abound due to the recent U.S. government shutdown, which magnified 2017 tax-reform complexity.

“Many people are now digging into the new laws and new forms, and needed guidance at a critical time. The shutdown created a backlog, and many of our clients were impacted. They couldn’t receive EINs [employee identification number] quickly for new trusts or accounts or get Form 1099s mailed to them in a timely manner,” Wittenberg said.

For more on taxes, see our Sunday story on handy deduction tips to save you time and headaches.