The first and second planks solve the retirement crisis.

Government can play a role in helping Americans save for retirement. Policy tools range from offering incentives, such as tax breaks for contributions or for setting up a plan, to providing consumer protections for retirement plan participants. Congress and the Obama administration have proposed approaches to increase retirement savings, but no major federal legislation has passed on this issue since 2006.3 That inaction has led state policymakers to look for opportunities to fill the gap.

Since early 2012, over half of the states have introduced legislation to set up or study options for state-sponsored retirement savings programs for workers at private sector or nonprofit employers that do not offer plans.4 Illinois, Massachusetts, Oregon, New Jersey, and Washington have enacted state programs.

To help state policymakers craft effective policies, The Pew Charitable Trusts analyzed efforts in progress or under legislative consideration in 25 states. The states’ objectives are consistent: increase retirement savings and reduce poverty among retirees so they can support themselves without social assistance—spending that puts a strain on state budgets. Lawmakers also want to ensure that reforms are implemented successfully, impose minimal burdens on employers, build cost-effective and sustainable programs, and protect employee retirement savings.

These goals provide a framework for examination of the various state approaches. Lawmakers must explore how to maximize program effectiveness, minimize administrative and financial costs for employers, and manage their states’ legal and financial risks. These priorities can conflict and require consideration of difficult trade-offs, making the task of crafting proposals tougher. For example:

The vast majority of workers would participate in a workplace retirement savings plan if given a chance. As a result, many state proposals require that employers of a certain size enroll all workers, though these employees can opt out. But small-business owners express concerns that mandating automatic enrollment could be an administrative burden, which could reduce the appeal of these proposals.