WA should help 1M workers save for retirement

Washington Gov. Jay Inslee delivers the State of the State speech in Olympia on Jan. 15, 2019. (photo by Dorothy Edwards/Crosscut)

More than 1 million Washington workers — most working at very small companies — have no access to employer-sponsored retirement savings plans. But that could change very soon if Washington’s Legislature passes the Secure Choice Retirement Savings Program.

The state Senate with bipartisan support has already adopted Secure Choice. It sets up voluntary, worker-owned Individual Retirement Accounts for those working at companies that do not offer a savings plan. The program would enable those workers to save their own money efficiently through payroll deduction and cost-effectively through a program that combines the best of the public and private sectors.

National research shows that workers who can save for retirement at their place of work are much more likely to actually save than those who don’t have that option. In fact, they are 15 times more likely to save just because the opportunity is available. In Washington, approximately 45% of private sector employees — about 1.1 million workers — have no workplace savings plan.

Insufficient retirement savings leads to a less dignified retirement and higher costs for government through increased social services. Passing Senate Bill 5740, the legislation that would establish the Secure Choice Retirement Savings Plan, will help address this crisis. Oregon, Illinois and California have such programs. New Jersey, Maryland and Connecticut plan to launch similar programs soon. Washington should join them immediately.

This type of workplace-based savings program has strong support among businesses, labor unions, AARP and the Washington Hospitality Association, which represents the hotel and restaurant industry, the sector that employs more workers than any other in our state and is overwhelmingly dominated by small businesses. Russell Investments, the largest investment firm in Washington, strongly supports this legislation. These key stakeholders support this legislation because it gives workers an easy way to begin saving at little or no cost to employers.

However, some insurance, investment and financial service firms are fighting hard to block this common-sense attempt to encourage retirement savings out of misguided fear and self-interest. And their lobbyists are using misleading and distorted information to boost their opposition. They say this legislation positions state government as an unfair competitor, yet they don’t offer quality retirement plans to these small businesses today. They say these programs will have high costs, but this is the exceptionally rare government program that pays for itself while keeping fees very low for workers. They say that these programs run afoul of federal law, but the six states that have launched or are about to launch similar programs don’t think so, nor do the 16 other states that are considering doing so.

Here’s what this legislation does for Washington workers and businesses.

It creates a program facilitated by the state government and administered by a private financial services firm selected through a competitive process or in partnership with an existing state program, such as Oregon’s, which was launched two years ago. This program will invest employee payroll contributions in worker-owned IRA accounts, helping them save their own money for retirement. The workers decide how much to save and how to invest the savings, or they can accept default options. The workers own the account, so it is completely portable if they change employers.

Employers who don’t already offer a retirement plan must enroll their employees in the program, or they could take it as an opportunity to establish their own plan. Employees would be automatically enrolled in the program, but may opt out at any time. It is completely voluntary for the employee. The obligations of the employer are minimal — add another payroll deduction as they already have for payroll taxes and distribute a sign-up form when new employees are hired. Small businesses that don’t have the human resources staff or financial know-how to establish their own retirement plan would now be able to offer a benefit that their employees’ value.

The retirement savings crisis hits workers at small businesses hardest. More than 70% of workers at companies with fewer than 50 employees lack access to a workplace savings plan. People of color and women are particularly disadvantaged. For example, 62% of Hispanic workers have no workplace savings plan.

Oregon’s launch of Secure Choice has been very successful, with 72% of eligible workers — nearly 70,000 — beginning to save for their retirement. Washington should get moving quickly.

Secure Choice as established by Senate Bill 5740 is good for business, good for workers and their families, and good for the economic well-being of Washington. Workers who save for retirement can expect to be more self-reliant when they reach retirement age and more socially engaged in our community.

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About the Authors & Contributors

Tim Burgess

Tim Burgess

Tim Burgess is a former city council member and interim mayor of Seattle.