State’s savings program may die in House
GOP could sidetrack systems that offer retirement plans for those without 401(k)
SACRAMENTO — A state program to help millions of Californians save for retirement could hit a roadblock this week if the U.S. House of Representatives votes to keep states from setting up individual plans for those who don’t have access to 401(k)-type benefits through their jobs.
With the GOP controlling the White House and Congress, some Republicans in the House are trying to scuttle systems established by California and at least four other states — Oregon, Maryland, Illinois and Con-
necticut — that automatically enroll workers without retirement benefits in payroll deduction plans.
Behind the move is the U.S. Chamber of Commerce, which has argued that state plans will lead more employers to drop their more robust 401(k) benefits because they’re more costly and cumbersome for businesses to manage. An erosion of privatesector retirement plans, the chamber says, will only hurt workers.
But the rush to kill state programs years in the making faces fierce opposition from the AARP, small business associations and labor unions. With research showing some 40 million American households have no money in retirement accounts, they say, Congress should be addressing the crisis, not undermining states’ attempts to fill the void.
“Americans need easy savings options. No one wants older Americans solely dependent on Social Security,” said Nancy A. LeaMond, executive vicepresident for the AARP, in a letter to Congress, which on Wednesday is scheduled to vote on two related resolutions, 66 and 67, to repeal rules set by the Department of Labor under the Obama administration.
For the rule change to take effect, the U.S. Senate would also need to repeal it. President Trump had yet to publicly weigh in on the issue as of Tuesday afternoon.
Secure Choice
California is just beginning to roll out its program, Secure Choice, which became law last year after years of study. Secure Choice would automatically enroll workers without retirement benefits in an automatic payroll deduction plan managed by a third-party company and overseen by a board led by the state treasurer. Workers could opt out, and the default contribution would start at roughly 3 percent. The only responsibility of employers under the program is to give their workers the enrollment paperwork. A state feasibility study estimated that roughly 7 million workers could benefit.
Surveys have shown broad support for such programs from small business owners, Democrats and Republicans. Two-thirds of California business owners surveyed last year by the Small Business Majority, a national trade association, last year were in favor of the plan. And 72 percent of Republicans and 83 percent of Democrats polled in a national survey this year by the National Institute on Retirement Security said they supported such programs.
“Through this program, you would see thousands and thousands of business owners in California have access to a product they would not otherwise be able to obtain,” said Mark Herbert, California director of Small Business Majority.
Nancy Harvey, who runs a small daycare in West Oakland, said she doesn’t have the money to offer a traditional retirement plan to her three employees — a common barrier for very small businesses — and that, at 55, and with a daughter in college, she has not managed to save for her own retirement.
Harvey was hoping California’s program would get her started, and was crushed to hear about the House proposal. “Really, here’s another example of how big corporations and self-interested politicians are trying to rig the system even further against working families,” she said.
If Congress repeals the rule, the programs could end up in court. State Senate leader Kevin de León, who championed Secure Choice, says California will continue to implement it. In a statement provided to this news organization, he called the move “just another Wall Street trick.”
While California’s Chamber of Commerce removed its opposition from the final version of the Secure Choice bill, the U.S. Chamber issued a white paper this year arguing that state retirement plans were well-intentioned but misguided. The answer to the retirement-savings crisis, it suggested, is to make private-sector plans more available. State plans, they say, lack the consumer protections of those in the private sector.
‘Flawed’ approach
Rep. Tim Walberg, a Michigan Republican who is spearheading the effort to overturn the rules, says he wants to make it easier for small businesses to join together to offer private retirement benefits. In a committee hearing Monday, he called the state approach “flawed.”
“Workers may have a new government program,” he said, “but they’ll have fewer retirement options through the workplace.”
A news release last week, issued by the House Education and the Workforce Committee, frames the attempt to change the rules as an act “to protect workers and small businesses.” Supporters of state retirement plans argue it’s just the opposite.
“That must be those alternative facts at work,” said Yvonne Walker, president of SEIU Local 100, who serves on California’s Secure Choice Board. “Allowing workers the vehicles to save today for their own retirement is so much better than having taxpayers cover the budgetary consequences of an increasing number of Americans that are unprepared for retirement.”