It is true that collectively we are not saving enough for retirement, but the “Retirement for All” bill making its way through the statehouse is not the answer.
The bill would create a state-run retirement fund for low-income workers who would be automatically enrolled in the plan. Small businesses with as few as five employees would have to set up the deductions, which would only stop if employees opt-out, which they would have to do every two years.
Reading through the public testimony in favor of the bill is like a tour through left-leaning activists’ belief that we take a passive role in our own economic well-being. They say we have a “lack of retirement security,” the current system “denies workers dignity,” that “everyone deserves a secure retirement,” and that we need to “protect retiring workers.”
Really, what all of us need to do is take an active role in preparing for retirement — and we already have the tools at our disposal to do just that.
As the testimony from the Connecticut Business and Industry Association points out, this is not a supply problem — there are already many low-cost retirement plans for low-income wage earners to choose from. What we have is a demand problem — people are choosing not to save.
Obviously there are some people who are not able to save for retirement because they cannot afford it, but this bill does not help them. The state would not put any money into these retirement accounts, it would all come from workers’ paychecks.
This would put the state in direct competition with private financial planners and other financial institutions, an industry that employs more than 100,000 people in Connecticut.
And do we really believe that the money would be safe in the “Connecticut Retirement Security Trust Fund”? The way the state has handled its pension fund, not to mention the way the federal government has handled social security — the word “lockbox” comes to mind — does not engender confidence.
We know, don’t we, that we need to save for retirement? But our culture feeds this idea that we can put off what’s good for us and “live for today,” that we deserve to “reward ourselves” because “life’s too short.”
Sen. Joe Markley, who was one of the three Republican members on the Labor Committee who voted against the bill, said he understands the impulse behind the bill even though he disagrees with it.
“The problem is people aren’t saving, but in my mind the solution is not for the government to force people to save,” he said. “This is a kind of paternalism . . . that the government knows what’s best for you.”
Technically, the bill doesn’t force people to save for retirement, although it does force them to actively opt-out — you’re enrolled unless you ask not to be.
Under the current bill, the state would guarantee a rate of return on the investment fund. The plan is to buy insurance to cover the state if there is a shortfall. But Markley said it was pointed out in testimony before the committee that insurance like that doesn’t exist.
Without insurance, state taxpayers would be on the hook if the retirement fund didn’t perform as expected. Testimony from the Department of Labor also pointed out that the department doesn’t currently have the infrastructure in place to handle potential complaints.
The public testimony against the bill came mostly from the business community. They were practically pleading with the state not to add another administrative burden to their already long list of state-mandated requirements.
“We have had a 401k retirement plan here at I.T. Dealers when the economy was doing well, but had to cancel it when the housing industry tanked,” wrote Carolyn Hafner, the treasurer for I.T. Dealers, which is based in North Franklin. “The administration charges alone, not to mention the enormous risk put on us by all the regulations attached to the plan through government mandates, forced us to cancel it.”
The bill has the support of several heavy hitters in the legislature. Senate Majority Leader Martin Looney co-sponsored the bill with House Majority Leader Joe Aresimowicz, and Senate President Don Williams testified in favor of the bill. So, even if it does not pass this year it is likely we will see it come up again next year.
There are other things we can do. For starters, how about financial literacy classes for high school students so they understand the importance of saving early and regularly for retirement? Or the state could partner with the private financial services industry to educate and inform low-income earners about what options are available to them.
As Sen. Markley said, “We have to behave in society like we’re dealing with responsible parties.”
If the state doesn’t start listening to its small businesses about the high cost of doing business in Connecticut, saving for retirement will get even harder because fewer of us will have jobs.
Ironically, one 69-year-old woman who wrote in favor of the bill was recently forced into retirement because her company moved to Montana.
Here’s the big picture — the more mandates we place on employers, the more they will up and move their businesses to places like Montana where there are fewer taxes and fewer regulations, and where there is still a good quality of life.
Suzanne Bates is a writer living in South Windsor with her family. While traveling across the country as an Air Force spouse, she worked for news organizations including the Associated Press, New Hampshire Union Leader and Good Morning America Weekend. She recently completed a research fellowship at the Yankee Institute. Follow her on Twitter @suzebates.