How a Bill Becomes Pension Law – in New Jersey

It was reported that a hearing was held today on Assembly Bill A4275 which would offer the retirement planning expertise of the stat of New Jersey to private-sector employees modeled on a program Illinois set up.

Yes the same security that public employees in Illinois and New Jersey feel these days could be extended to the private sector.  Anyone seriously considering taking up these states on their offers might also look into getting a haircut from Sweeney Todd. So how did it get on each state’s radar?

It was bought there by investment houses and plan administrators who fantasize about a steady flow of funds and 10% expense ratios.

But aren’t pensions governed by federal law?  How can the states guarantee tax deferral of contributions.  The New Jersey proposed law considers that:

The board must request in writing an opinion or ruling from the appropriate entity with jurisdiction over the federal “Employee Retirement Income Security Act of 1974” (29 U.S.C. s.1001 et seq.) regarding the applicability of that act to the program. The board may not implement the program if the IRA arrangements offered under the program fail to qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the Internal Revenue Code or if it is determined that the program is an employee benefit plan and State or employer liability is established under the “Employee Retirement Income Security Act of 1974.”

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So it will be a multiple-employer plan that will require a massive administration mechanism to provide to participants what they could easily do for themselves by simply opening up an IRA. Basically what the role of government has morphed into in both states.

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Though the legislators might argue that the people they are targeting are too ignorant to figure out how to plan for retirement on their own and that might have some validity.  After all, it was those people who elected them.