In less than 20 years, one in every five Americans will be over the age of 65 and we will live longer than any generation before us. For those without adequate savings for retirement, those added years will be a time of uncertainty and dependency rather than leisure.

Connecticut is the latest state seeking to stave off this looming crisis in elder poverty, passing legislation to provide access to a state-sponsored retirement plan for the 600,000 Connecticut residents who do not have a plan through their employers. The bill will automatically enroll workers in businesses with five or more workers in a retirement plan overseen by a new quasi-public authority. Connecticut joins California, Illinois, and more than a dozen other states pushing for state-sponsored plans to encourage workers to save for retirement.

The accelerated pace of activity follows decades of wage stagnation that have left the average American worker with just half of what workers saved in the 1970s. Half of those nearing retirement have no retirement savings at all and those that do have savings have only enough to provide a median income of around $400 per month.

At the same time, employers have largely abandoned defined benefit pension plans that once guaranteed a minimum level of security based on salary and length of service, opting instead for plans that put the onus on workers to build up their own retirement accounts. Today, more than half of American workers have no private pension coverage at all.

Those who retire without a pension or sufficient savings will depend largely on Social Security for their retirement income, a system that will grow increasingly burdened as baby boomers retire, leaving fewer workers to cover the costs of each retiree.

This daunting reality has spurred states like Connecticut to act.

Innovation at the state level, however, is currently hindered by the federal Employment Retirement Security Act (ERISA), which generally preempts state action on private sector pensions. State legislatures have had to build language into bills making any plan contingent on an exemption from federal ERISA requirements. This burden creates uncertainty for both workers and state administrators, preventing many states from even exploring the possibility of a plan.

In response, the Department of Labor (DOL) is currently developing a safe harbor rule that would clarify how states can bypass ERISA requirements. The rule would let states develop the retirement security model that best suits their residents, while also learning from the successes and missteps of other state plans.

While the proposed DOL rule is a great first step, it does not go far enough in its present form. The rule is limited to states, but cities such as New York are also considering similar plans. They should be afforded the same opportunity to ensure a secure retirement for their residents.

In developing its rule, the DOL should aim to reach the largest possible number of workers, including those whose state legislatures are unable or unwilling to address retirement security. Including cities also allows for more tailored programs when demographics and industries vary widely across a state.

Preventing an elder poverty crisis will require creative solutions at all levels of government. The DOL should ensure that federal regulations foster that creativity, rather than stifle it.

By ANDREW FRIEDMAN

Source