Roadmap for retirement? Pennsylvania eyes savings program for private-sector workers
Other states, including
A bipartisan group of
This is not just a national trend, its also a state reality, said
Many small businesses dont offer retirement benefits because they see plans as too costly or complex to administer. That has left an estimated 2.1 million Pennsylvanians without a workplace retirement plan.
Business leaders and retirement consultants agree on the need to discuss retirement savings, but they also expect pushback from companies that may see a new program as a government mandate.
Oakley, who has been tracking retirement initiatives across the country, believes Torsella has done a good job of building a case for
Doing nothing, she said, could harm the commonwealths bottom line. An independent study commissioned by the Pennsylvania Treasury found that insufficient retirement savings led
Absent any changes, those numbers are projected to grow by 2030 to
Thats a direct cost to the state, Oakley said.
Most states have explored three types of so-called retirement security programs. The most popular option has been individual retirement accounts, or IRAs, with automatic enrollment for workers who lack access to an employer-sponsored plan.
In states that have created this kind of program, most employers that do not offer a retirement plan are required to participate in the auto-IRA, though rules vary by state.
These auto-IRA plans feature automatic payroll deductions and the money is sent to portable retirement accounts, which are often managed by the state. Deductions can vary, though most plans start around 3 percent. Employees can choose to opt out.
A state House bill favors the auto-IRA option for
A retirement proposal in the state
How's it going in
The group grew to 53 employers by October with nearly 3,300 employees contributing to the plan. About 72 percent of employees in the pilot group have stayed in the program, while others have opted out.
"The most common reason we can identify is people don't think they can afford to save at this time," said
The first phase of an
OregonSaves aims to keep things simple for employers, Metlen said. Companies that don't offer a retirement plan are asked to register for the program and provide employee data. They then have to make payroll deductions for participating workers and keep track of what was paid in.
"When talking to some employers for the first time, we've heard concerns about the program being a requirement," he said. "We are definitely aware that there are a lot of pressures on employers, so we are always looking for ways to limit their role to just parts of the process we can't do. We want the program to benefit businesses as well as employees, helping provide an important benefit for employees that attracts and retains good workers."
As of this week, Metlen said 334 companies have registered to facilitate the program. There are about 32,000 employees in the system, with about 0 percent of participants contributing about 5 percent of gross pay.
OregonSaves was set up with 5 percent as the minimum contribution, though employees can cut that rate to as low as 1 percent of gross pay. The program also has a 1 percent automatic annual escalation built into the 5 percent standard until the employee contribution reaches percent. Participants can opt out of the automatic increases, and they can also opt back into the program at any time if they leave.
In the future, Metlen said the plan is to allow employees to contribute a specific dollar amount, not just a percentage of pay.
Other states have created marketplace programs, in which the state develops an approved list of financial services firms that can promote and sell low-cost retirement plans to small businesses.
Another option is a multiple-employer plan, in which two or more unrelated companies adopt a single 401(k)-style plan.
The multiple-employer plan, or MEP, allows for higher employee contributions than an auto-IRA plan. Contribution limits for a 401(k) plan are
Oakley isnt calling on
I think it comes down to what is the most effective plan to give the most amount of people the opportunity to save, Oakley said.
If the Republican-led General Assembly decides to pass legislation, Oakley believes
But not everyone is ready for a change, especially if it is accompanied by mandates.
My members are more worried about paying the light bill and finding good employees, he said.
Shivers, who is on the state task force, also said he doesnt believe forcing people to put money into a state-administered program will help them realize the importance of retirement savings.
Shivers is pushing for more financial literacy and retirement education in school.
If this is such a major issue, shouldnt we talk about it before kids go into the real world? he asked.
She thinks the state would help more workers with retirement savings if it offered companies tax credits or other incentives to start retirement plans.
With no additional task force hearings ahead, Torsellas office has said the hope is for legislative action this year.View the full article from the
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