Low wage workers whose employers don’t offer IRAs, are the focus of pending legislation that would also let employees take the IRAs with them when switching jobs.
An interesting new bill is being discussed in the New Jersey legislature that may face some challenges from business owners. It would let people who work for businesses with as few as 25 employees to be enrolled in a professionally managed retirement plan. The goal is to get more Americans saving for retirement through automatic payroll deductions.
The bill, S-2891, would create what’s called the “Secure Choice” retirement program. “The New Jersey Secure Savings Program will make available to private-sector employees, a convenient and efficient way to save for their retirement,” said Senator Lagana in a statement. “Access to retirement savings accounts through an employer is among the best ways to effectively save. The savings program will accomplish the goal of helping hardworking New Jerseyans prepare for their future without burdening our businesses.”
“The majority of American workers in the private sector do not have access to an employer-sponsored retirement plan, and this is especially true for low-wage workers,” said Singleton (D., Burlington).
It’s not known whether the bill will pass. Business groups may oppose the bill, due to administrative costs. However, the legislation would let employees create individual retirement accounts and contribute via automatic payroll deductions. The program would target the growing number of businesses that don’t provide retirement plans for their employees.
“There are so many people working right now, paycheck to paycheck, who do not have any money saved for retirement because they can’t afford to,” said Senator Turner. According to AARP, about 1.7 million people in New Jersey don’t have a vehicle to save for retirement at their jobs.
The bill states that the program would be overseen by a seven-member Secure Choice Savings Board, with members appointed by the governor, the Senate president, and Assembly speaker. The savings fund would be outside and apart from other state funds, and neither employers nor the state would have any liability for, or claim to, the fund.
A similar plan has been proposed in Pennsylvania by the state treasurer, but his concept has not generated much support. That may change as the state’s population ages. According to research, Pennsylvania is the seventh oldest state in the country. As of 2015, 2.2 million of the state’s residents—that’s 17%–were age 65 or older.
The idea is that encouraging workers to save more for retirement could possibly offset the state’s big public assistance programs that support so many of the state’s elderly today. By 2030, researchers believe that the state will need $1.1 billion in extra spending to care for its elderly population.
Reference: The Philadelphia Inquirer (February 25, 2019) “Should New Jersey embrace portable retirement savings plans?”