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House Bill 2068 |
House Author: Coleman et al. |
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Effective: Vetoed |
Senate Sponsor: Garcia |
House Bill 2068 amends the Government Code to authorize a hospital district created under general or special law that offers a deferred compensation plan to the district's employees, at the district's option, to elect to require automatic employee participation in the plan unless the employee affirmatively elects not to participate in the plan. Among other provisions, the bill sets out provisions relating to participating employee contributions, changes to employee participation, required notice to employees, and the transfer and investment of an employee's deferred amounts and investment income.
Reason Given for Veto: "House Bill 2068 provides for the automatic enrollment of hospital district employees in a retirement plan at a contribution level of one percent unless the employee elects not to participate. Studies have shown, however, that automatic enrollment at a very low contribution percentage actually ends up reducing employees' overall retirement savings. This is because automatically enrolled employees are unlikely to voluntarily elect to contribute more than the automatic contribution. If required to choose a contribution amount, many employees will select an amount much greater than the automatic contribution. See Ryan Bubb & Richard H. Pildes, How Behavioral Economics Trims Its Sails And Why, 127 HARV. L. REV. 1593, 1609 (2014) ("[I]n practice these programs appear to reduce overall retirement savings."); see also Eleanor Laise, Automatic 401(k) Plans Might Not Save Enough, WALL STREET JOURNAL (Jan. 8, 2008). One of the largest retirement plan administrators in the country has reported that between 2007 and 2011, the percentage of plans using automatic enrollment—usually with a default contribution of three percent—nearly doubled, while overall retirement savings rates declined. VANGUARD, HOW AMERICA SAVES 2012, at 29 fig.3l (2012) (attributing this decline in part "to the growing use of automatic enrollment and the tendency of participants to stick with the default deferral"). Thus, House Bill 2068 would likely undermine its stated goal of increasing retirement savings and investment returns."