Innovative state solutions to America’s savings crisis are in danger. Federal overreach threatens an important Department of Labor rule that gives states flexibility to help workers save for retirement.
Fifty-five million workers in America have no way to save for retirement out of their regular paychecks. Their employers don’t offer a retirement plan because it can be costly and complicated to do so. The problem is especially severe among communities of color. Only 54 percent of African American and Asian American employees and 38 percent of Latino employees work for an employer who sponsors a retirement plan.
The result? The median retirement account balance for all working-age households is only $3,000. And almost 20 percent of people between the ages of 55 and 64 have no retirement savings.
States lead the way
States are the laboratories of democracy. Recognizing that employees are 15 times more likely to save for retirement if they have access to a workplace payroll deduction plan, several states have begun to forge a solution to this savings crisis.
California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, Oregon and Washington have all signed programs into law that remove regulatory and operational barriers to help small businesses that do not already provide a retirement savings plan to their employees to do so. These programs are called work and save programs or, sometimes, secure choice.
This is a popular idea. Again, according to the above-referenced survey, “Seventy-six percent (76%) or three in four political conservatives agree that elected officials should make it easier for small businesses to offer retirement plans to their employees, as do about four in five moderates (85%), and liberals (90%).”
DOL rule provides guidance to states
A 2016 Department of Labor rule on “Savings Arrangements Established by States for non-Governmental Employees” provides guidance to states on how to enter into these public-private partnerships.
The rule is clear: Any automatic IRA program established by the state must remove the operational burden of running a retirement plan from small-business owners. The business owner’s only interaction with the program is to facilitate payroll deductions for these savings plans — something they’re already doing.
Retirement security in danger
But a new resolution under the Congressional Review Act — H.J. Res. 66 — threatens to overturn the Department of Labor rule. And the House of Representatives could vote on it as soon as this week. As AARP’s Nancy LeaMond says in the Los Angeles Times, repeal of this rule would “have a significant chilling effect on states, sending the political message that state flexibility is not a priority.”
As the nation’s strongest voice for Americans age 50-plus, AARP is fighting to protect your retirement security. We are working tirelessly to urge members of Congress and the U.S. Senate to vote no on H.J. Res. 66. AARP’s grass roots are mobilized and visiting with members of Congress daily. Our message: States should maintain their flexibility to establish private retirement programs, free from federal overreach. Congress should vote no on H.J. Res. 66!
I will have much more to say on this important issue (and more!) on Twitter, so please follow me @RoamTheDomes for all the latest.
Elaine Ryan is the vice president of state advocacy and strategy integration (SASI) for AARP. She leads a team of dedicated legislative staff members who work with AARP state offices to advance advocacy with governors and state legislators, helping people 50-plus attain and maintain their health and financial security.