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Why Are States So Interested In Your Retirement Plans?

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Chad Parks is Founder, President, and CEO of Ubiquity Retirement + Savings, formerly The Online 401(k), has helped savers contribute over $1.4 billion towards their retirement since 1999. As one of the first flat-fee-for-service small business plan providers in the nation, Ubiquity delivers peace-of-mind with zero hidden-fees in the fine print. The company is headquartered in San Francisco with satellite offices from coast-to-coast. Read More...

Parks started out as a broker in the financial services industry by growing a portfolio of individual clients at San Francisco’s Piper Jaffray. Driven by a desire to better serve his clients while anticipating the phasing out of the traditional broker model, Parks left Piper Jaffray in 1997 to obtain his CFP designation and start his own fee-for-service, independent financial planning practice, Retirement & Education Group, Inc.

In his financial planning practice, Parks came across many small business owners looking for cost-effective and quality retirement plans. Finding the small business market highly neglected and underserved, Parks saw the opportunity and took it by launching The Online 401(k). Today, Ubiquity serves more than 7,000 small business customers in 50 states, providing solutions both directly and through partners, such as Zenefits, Charles Schwab & Co. and Morningstar, as well as payroll companies, financial planners and CPAs.

Parks has been quoted in many financial services as well as national publications such as The Wall Street Journal, The New York Times, Fox Business, Yahoo! Finance, USA Today, CNN Money, Bloomberg Wealth Manager, Business Week, Entrepreneur and Plan Sponsor for his considerable work performed in the space of small business retirement as well as his foray into documentaries with his independently produced Broken Eggs Film, released in 2014.

With his extensive work in Washington DC in getting legislation passed in order to stop the practice of hiding fees in the fine print, Parks has become the go-to expert on public policy as it relates to 401(k), as well as the looming retirement crisis in America, and what we can do to fix it.

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August 6, 2015 at 10:16 am
Retirement News

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During President Obama’s State of the Union address in early 2014, he proposed a federal government-sponsored retirement plan called MyRA (my IRA). Sorry, President Obama, but states such as California, Illinois and Connecticut are already way ahead of you in getting the ball rolling on offering a state-sponsored retirement plan to individuals and businesses.

This is a trend we expect to see going forward. States are finally noticing there is a serious lack of coverage for workers in the United States, those employed by small businesses. A whopping 92 percent of businesses with between two and 20 employees don’t offer a plan: that represents almost 40 million employees and 4 million businesses.

Of those who have the ability to save at work only 46 percent have saved less than $10,000 and 32 percent have saved nothing at all.

Why do states care? They are realizing that their social services – state-based Medicare/Medicaid, housing and food assistance — will be depleted beyond their ability to provide assistance to people in old age. Forward-thinking legislators are looking at those statistics knowing that down the road, there will be serious issues when cash-strapped retirees ask for help. Avoiding that, or even lessening the blow, will require businesses – especially small businesses – to give employees the option to save for retirement.

The states’ efforts vary. For instance, Washington wants to offer a marketplace. However, we feel this will not be effective because there are already options that exist.

Illinois’ progressive legislation goes into effect July 2017. Small businesses in that have been in existence for more than two years and have 25 or more employees must offer a workplace savings program. In order to meet the mandate, businesses have three choices: enroll in a 401k plan, payroll deduction IRA or the state-run system in order to solve the problem.

Most of the states’ proposed programs will auto-enroll employees unless the employee opts out. Auto-enrollment is a very effective tool – 80 percent of participants stick with the plan once they’re enrolled. Because an employer match is not required, there are very little out-of-pocket expenses for the business owner. It only requires a little bit of money and effort to start, especially when compared to the relative benefits.

We haven’t seen any state mandate that requires employees to contribute, but that’s fine. At the heart of it, people simply need the vehicle to save at work.

Critics will say that it’s not worth it, and it won’t make much of a difference. To that, we say that it’s not about the dollar amount because every bit makes a difference.

This is about getting people into the retirement savings system . Once that happens, they will change their behaviors and attitudes toward saving.

We believe it’s a positive step to reduce the impact of the looming retirement crisis, and we will continue to provide insights and updates on the blog as state’s plans evolve.