Utah employees may soon be automatically enrolled in retirement savings plans.
Currently, most employees have to opt into their employers' retirement savings plans, such as 401(k).
The Senate Business and Labor Committee on Tuesday gave unanimous support to SB131, which would give all employers public, private and nonprofit the ability to include employees in savings plans such as 401(k) unless they opt out.
"Some studies have shown that more than half of American households have zero savings in employer-based 401(k) plans," said sponsor Sen. Wayne Niederhauser, R-Sandy. "We're trying through public policy to get more people saving for retirement."
The bill would require employers to notify workers of the automatic enrollment and give them the option of not participating.
Niederhauser said his bill is similar to the federal Pension Protection Act of 2006. However, that federal act does not include all businesses, he said.
That act waived liabilities for employers if they automatically enroll employees in a 401(k) plan and it loses money. It also required retirement money be invested in either life-cycle funds that adjust investments based on the age of the employee, a balanced mix of stocks and bonds, or an actively managed account. The employee may also choose to manage their own investments.
Currently, many companies invest retirement money in a stable account, like a money market fund, that carries minimal risk but has very little growth potential.
The U.S. Department of Labor estimates that about one-third of employees do not participate in a company-sponsored 401(k) plan. If automatic enrollment is used, that number could drop below 10 percent.
Retirement savings could increase by more than $130 billion with the automatic enrollment plans, according to Labor Department estimates.Before voting to move the bill to the full Senate, committee Chairman Kevin Van Tassell, R-Vernal, commented, "I think it's a great bill."
Contributing: Associated Press