Automatic for the People

On a fall morning in 2011, Daniel Biss, a State Senator in Illinois, was listening to a lobbyist give a self-aggrandizing presentation about his work in the State Capitol. But one “accomplishment” on this lobbyist’s list—killing an automatic IRA savings bill which would have automatically enrolled those without a retirement account—stood out.

When the lobbyist completed his remarks, Biss pulled him aside and asked him for the number of the bill the lobbyist had squelched. “Now, he probably wishes he hadn’t [done that],” Biss said at a recent New America event recounting how the Illinois bill became a law. A revised version of that bill, sponsored by Biss, recently became an Illinois state law set to take effect in June of 2015.

If you’re not quite sure what an automatic IRA means, don’t worry. Biss is a former mathematics professor whose specialty is translating complicated policies into more easily-digestible chunks that are accessible enough for you to understand, but also leave no doubt that he is whip-smart. Educating lawmakers was—and still is—a process, said Sam Tuttle, Director of Policy and Advocacy at the Heartland Alliance and one of Biss’s allies. “It was important because people need time to get their heads around this.”

The core of the automatic IRA is that it gives more people a better chance to save for retirement by providing them access to a retirement plan if their employer doesn’t offer one and asking them to opt out rather than requiring them to seek out and enroll in a plan entirely on their own. Providing access and making enrollment automatic, as the bill championed by Biss and his coalition will do, seems like a small solution, but it makes a big difference. It’s one of the spillovers of Nudge: Improving Decisions About Health, Wealth, and Happiness, a popular book which shows how government can use small changes in policy to be more effective.

Right now, only about half of American households own a retirement account, said fellow panelist Justin King, Policy Director in the Asset Building Program at New America. “Accumulating savings is important because savings becomes wealth and wealth becomes opportunity.”

After going through some of the basics of the legislation, the panelists entered a lengthy discussion of how the bill actually became a law. The conversation offered a crucial behind-the-scenes perspective and potential lessons for other states looking to adopt similar legislation.

What began as a small, dedicated coalition fighting for the bill soon expanded when the group conducted research that showed it wasn’t just a Chicago issue or a rural issue. It was an issue statewide. “We found that in every single legislative district, over half of the private sector workers didn’t have this type of access,” said Courtney Eccles, Policy Director at the Woodstock Institute. “That’s when we were able to say to every single policy maker in Illinois ‘This is a problem, and it’s a problem in your district.’”

It wasn’t completely smooth sailing—that earlier lobbyist had tried to kill an earlier automatic IRA bill for a reason, and opposition was found on both the traditional “left” and “right.”Many parts of the financial service industry offered stiff opposition to the law. Some unions also balked at the idea of solving the retirement security issue without working to expand pension-style systems. In the end, said Biss, his coalition was able to win substantial union support by embracing the idea that providing a retirement plan for everyone would ease pressure on unions caused by “Pension Envy” in the current political atmosphere.

Still, some lawmakers were skeptical of the plan because of their distrust in government’s ability to manage money or budgets. So when the Illinois Senate passed the bill there were no votes to spare.

Senator Biss and the panel explained how further revisions to the law and fortuitous timing allowed the bill to pass the Illinois House of Representatives and to be signed into law by the outgoing Governor. The conversation among the panelists shifted from how the Illinois bill was passed to the national context. Currently, approximately 20 states are considering automatic IRAs—at stages ranging from advanced legislation to preliminary study bills. States that want to introduce this kind of legislation shouldn’t have to reinvent the wheel,  noted Angela Antonelli, the Executive Director of Georgetown’s Center for Retirement Initiatives, which is designed to be a resource to help states and advocates with legal and regulatory issues.

But beyond the implementation of the automatic IRA program in Illinois looms a larger conflict. As more states look into legislation that creates automatic IRA programs, the possibility remains that the plans could be found to be in conflict with federal law and therefore be nullified.  This tension between the states and the federal government, as old as the United States itself, was palpable during the panelists’ discussion as well. But inside the President’s 2016 Federal budget proposal is a proposal to create a waiver from federal law for several states to expand automatic IRA plans and a call for funding to support these initiatives. J. Mark Iwry, a Senior Advisor to the Secretary and Deputy Assistant Secretary at the U.S. Department of the Treasury, emphasized that while the legal status of Illinois Secure Choice remained up in the air, the Administration is eager to see plans promoting retirement security are adopted.

So if and when more states take up automatic IRA enrollment bills, lawmakers should know that just as with all politics, it comes down to relationships. The Illinois coalition knew that it might come down to getting that one last meeting right before the vote, Eccles said. And Biss too admitted, “I was just insufferable” in haranguing his Senate colleagues. While Illinois has leapt ahead of other states, it appears they’re not done educating, haranguing, and compromising to see their vision of retirement savings for all become reality.