While many local governments have supplemental savings plans, there are surprisingly few incentives for employees to enroll in them. This is at a time when fiscal pressures have prompted many local governments to reduce retirement benefits for new hires.
The study found four main reasons local governments been slow to adopt automatic enrollment practices:
- Legal constraints. Only 11 states permit automatic enrollment for public defined contribution plans. In a few places, an exemption to anti-garnishment laws has been written into statute for a particular retirement system or plan.
- Perception. Government leaders worry that automatic enrollment in a supplemental savings plan might overburden their employees, especially those who earn modest wages.
- Labor questions. There is debate in the labor community about whether or not automatic enrollment should be supported.
- Administrative challenges, such as multiple record keepers.
The brief examines the experience of local governments that have successfully adopted automatic enrollment — Cobb County, Georgia; Multnomah County, Oregon; and the city of Los Angeles, as well as that of the South Dakota Supplemental Retirement Plan, which serves more than 470 units of local governments.
It finds that working with employees and focusing on education were key to successful implementation.