Today, President Trump issued an Executive Order directing the creation of a federal marketplace for IRAs. The Administration intends to put limits on the types of products that can be offered and require IRA providers to mimic the investment options available through the federal Thrift Savings Plan. They will also make sure that the IRAs can accept the Saver’s Match, a federal matching contribution available to lower-income savers. The devil, of course, is in the details, and the specifics will need to be fleshed out before the marketplace launches in 2027.
The policy goal is to help more people save by making it easier for those without a workplace retirement plan to find and compare savings options. Presumably, the Administration believes the complexity of the IRA market poses challenges to the average consumer and that they can overcome those challenges by creating a centralized place to find and compare IRAs. Only time will tell whether they are right, but the Executive Order is a meaningful (if incremental) attempt at increasing retirement savings.
The Executive Order builds on over two decades of work by policymakers and advocates to increase retirement plan coverage and savings. For example, Washington State launched the Retirement Marketplace in 2018, and New Mexico and Utah are working on similar programs. The Georgetown Center for Retirement Initiatives is a wealth of good information about the state retirement savings programs, and Pew’s Retirement Savings Project has also done great work on state-based solutions.
It is notable how much similarity there is between President Trump’s Executive Order and the Obama Administration’s retirement policies. The Obama Administration created the myRA program to give people just starting to save a low-cost, low-risk IRA. The myRA program (which wound down in 2017) was addressing the very same barriers to savings as the Executive Order. The differences are primarily tactical with the Trump Administration prioritizing investment in the free market and the Obama Administration prioritizing safety and liquidity for lower-income savers. However, both approaches were designed to integrate with, not supplant, the private sector, and it is difficult to not see the structural similarities between the new IRA marketplace and the state health care exchanges created under the Affordable Care act.
To be clear, the Executive Order does not go as far as many advocates would like. It does not obligate employers to provide a plan; it does not use automatic enrollment to reach non-savers; and it does not facilitate longevity risk pooling. Realistically, it would take an act of Congress (e.g., Representative Neal’s Automatic IRA Act) to achieve those goals. But the Executive Order might set the stage for future bipartisan compromise.
