UK Officials Unveil Auto Enrollment Plan

December 12, 2006 (PLANSPONSOR.com) - As many as 10 million UK workers could be automatically enrolled into personal accounts or workplace retirement savings plans under a program announced Tuesday, in which employees could put away a minimum of 8% of pay annually.

The plan, announced by Work and Pensions Secretary John Hutton, provides that employees who opt to remain enrolled have to set aside at least 4% of pay that will be matched by a 3% employer contribution. Workers will get another 1% in the form of government tax relief, according to the government. Employees can opt out altogether.

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Hutton proclaimed in his announcement that the proposal “will kick start a new savings culture in the UK .” He said the government expects workers to put about £8 billion annually into their retirement nest eggs.

The plan is expected to be introduced in 2012. Hutton said there would be a “choice of funds for those who want it”, including socially responsible and ethical offerings as well as a default option for those who do not specify how they want their money invested.

Employers can also auto enroll workers into their existing retirement plan if it meets specified government standards, Hutton said.

According to the announcement the long-term costs for personal accounts will be in line with those set out by the Pensions Commission of around 0.3% of funds under management. Finally, there will beno transfers in and out of personal accounts and a maximum annual contribution during the first year of £10,000.

Public Reaction

The reforms have broadly met with enthusiasm from campaigners and unions, according to a news report in the British newspaper Guardian. TUC general secretary, Brendan Barber, said: “Today’s proposals are to be warmly welcomed. They are another important building block in a new pensions settlement. Compulsory employer contributions are a major gain for people at work.”

The charity Age Concern also welcomed the proposals. Director general, Gordon Lishman, said: “Personal accounts will offer a beacon of hope to millions of people struggling to find their way through the pensions wilderness.”

“The proposals put forward in this white paper are good news for anyone without access to a decent occupational pension, many of whom are women, and should finally make pensions saving worthwhile for the majority,” he added.

The auto enrollment aspect of Hutton’s plan comes as the trend toward automatically putting eligible workers into a retirement program continues to sweep through the US retirement savings scene (See Auto Enrollment Biggest 401(k) Change after PPA ) and has been the subject of major regulatory pronouncements on how such plan features can be implemented (See DoL Releases Default Investment Option Safe Harbor ).

More information on the British proposal, including the full text of a Hutton White Paper, is here .

Oregon Latest to Move Toward Universal Health Care

December 11, 2006 (PLANSPONSOR.com) - Oregon's Senate Interim Commission on Health Care Access and Affordability has approved a draft of a universal health care plan for the state.

The Oregonian reports the plan would require all employers and individuals to contribute money to a common pool called the Oregon Health Care Trust Fund. Money from businesses would possibly be collected via a payroll tax, according to the Oregonian. Large companies with self-insurance plans would have their contributions reimbursed.

In addition, an 11-member Health Care Trust Fund Commission or board, appointed by the governor, would adopt regulations and administer the trust. Businesses and individuals could choose health plans, which would be paid through the trust with rates set by the commission or board.

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The plan would give every state citizen access to a health card that could be used to buy a complete health care package – including dental, mental health and vision coverage – for less than most businesses and individuals now pay, according to the Oregonian. Residents who earn less than 250% of the poverty level would not have to pay to be in the plan. Those who choose not to participate in the plan would lose their personal state income tax deduction. All participants would be required to write an advance directive, describing the level of care they would want at the end of life.

The commission’s plan will be refined into a bill that, if passed by the Senate next year, will establish only the trust fund commission and a small semi-independent agency that will work out details for the plan, including costs, the newspaper said. Then, the Legislature would have to pass another bill to put money into the fund, meaning Oregon residents may not see the plan in action before 2009.

Oregon is just the latest in a ripple of states that have passed or are considering universal health care mandates since Massachusetts passed its aggressive health care bill in April (See MA House Overrides Vetoes of Health Care Bill). Tennessee governor Phil Bresden singed Cover Tennessee, a universal health care mandate, in June (See TN Gov. Signs Health Care Bill).

Other states including Michigan (See MI’s Granholm Joins Health Reform Trend ), Minnesota (See Minnesota Looking Into Universal Health Care ), and Vermont (See VT Health Care Reform Moves Forward ) have introduced similar bills providing health care subsidies for low income individuals and imposing fees on businesses that do not provide employee health care coverage. However, in July a federal judge threw out a Maryland law mandating employee coverage from large employers in the state, saying the Employee Retirement Income Security Act overrides the state mandate (See Judge: ERISA Trumps MD ‘Wal-Mart’ Health Care Law ).

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