How the Obama Administration’s New Rule to Create State-Based Retirement Savings Could Hurt Savers and Cost Taxpayers

The Obama Administration’s attempt to increase workers’ access to retirement savings by pushing them into less secure state-run savings plans could hurt savers and cost taxpayers. Without any federal protections, state-run plans could be subject to political interests or even used to subsidize other state spending. The allowance of defined benefit pension plans could restrict workers’ access to and control over their savings while adding to states’ existing unfunded pension liabilities.

Rather than giving state governments a competitive advantage in managing workers’ retirement savings—an area in which both the federal and state governments have demonstrated complete incompetence—the federal government should encourage greater private savings by streamlining and removing restrictions on the types and amounts of tax-preferred saving and by making it easier for businesses to pool together to offer 401(k) plans.

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