ICYMI: Rhode Island Senator Unveils Auto-IRA Plan, Schwab Gets Arbitration & Gen X Plays Catch-Up

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Rhode Island Senator Unveils Auto-IRA Plan

U.S. Senator Sheldon Whitehouse (D-RI) has introduced legislation to create a national automatic payroll deduction IRA or auto-IRA to help close the retirement planning gap.

Dubbed the Automatic IRA Act of 2019, the bill would require employers who do not provide another qualified retirement plan and who also have more than 10 employees to automatically enroll workers in auto-IRAs unless the employee opts out.

The bill has been referred to the Committee on Finance for consideration. According to a 2017 Pew survey, employers without retirement plans were either somewhat or strongly supportive of the concept of auto-IRAs.

Schwab Gets Arbitration, Avoiding Class-Action Suit

On Tuesday, a federal appeals court ruled that Charles Schwab could use arbitration to settle individual claims against it instead of facing a class-action lawsuit.

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Schwab is accused of breaching its fiduciary duties by former employee, Michael Dorman. Dorman alleges that in 2017, stacked its employee 401(k) plan with Schwab-affiliated funds that Dorman says, “charged higher fees and performed more poorly than other investments in the market.”

Following precedent, claims against 401(k) and other retirement plan sponsors where the sponsor is accused of violating its fiduciary duty, is considered to be a violation of the Employee Retirement Income Security Act, but in Schwab’s case, the topic of discussion was whether arbitration could be used instead of a class-action lawsuit since the provisions in the plan state that disputes must be settled by arbitration on an individual basis.

Despite the fact that these provisions are common, class-action suits have persisted as the preferred model until now.

Gen X Needs To Play Catch-Up With Retirement Planning

A study by the Employee Benefit Research Institute shows that Gen Xers are less confident than baby boomers or millennials in their ability to live comfortably in retirement.

The oldest Gen Xers are getting close to retirement age, and yet have done very little planning.

Among the three generations studied, 65% of Gen Xers have saved for retirement, compared with 78% of baby boomers and 57% of millennials. In addition, only 31% of Gen Xers have figured out how much they need to save for retirement, compared with 43% of baby boomers and 33% of millennials.

AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.