By Rich Jones
A critical vote could come in the U.S. Senate any day now. And Sen. Cory Gardner has the chance to stand up for his constituents instead of appeasing Wall Street interests lobbying him to stymie local and state efforts to tackle our nation’s retirement needs. Nearly 800,000 Coloradans have no access to retirement plans at work and many businesses struggle to offer their employees low-fee options. Colorado is selling itself as a start-up friendly state. But few entrepreneurs can easily offer benefits like retirement programs. Making it easy for everyone to begin building wealth early in their careers helps all Coloradans.
Last month, the U.S. House approved H.J Res. 66 & H.J. Res. 67 and sent these ill-conceived measures to the Senate. They would bar state and local governments from creating low-fee savings plans that help people without options at work to get a jump start on saving.
Our country faces a retirement crisis of epic proportions. The U.S. Census bureau just released data showing that 55 million Americans have no retirement plan at work. Even worse, the average retirement savings is a paltry $5,000.
When individuals save, states do too. Economists in Utah found that if retirees who had the smallest nest eggs had boosted their savings by just 10 percent, or about $14,000 on average during their working years, taxpayers could have spent $194 million less to support them.
Given the gravity of the crisis, it’s perplexing that members of Congress would want to halt innovation in the states, especially Republicans who have long touted states’ rights. These plans have the backing of numerous state officials — including many Republican state treasurers — in Indiana, Idaho, Louisiana, and Utah. The bipartisan National Conference of State Legislatures urges the Senate to defeat H.J. Res 66 writing, “Passage of this resolution … will result in an unwarranted preemption of state innovation, will restrict the ability of millions of hardworking Americans to save for retirement, and will prove costly to federal and state budgets”.
Dig beneath the surface on the vote in the House and you’ll see that many Congress members are trying to pay back their pals in the finance industry who don’t want average Americans to have low-fee, automatic alternatives. Senators should be more sensible and help workers of all ages save for their later years.
A recent New York Times story illustrated perfectly how Wall Street firms are failing to serve Main Street businesses. A Maryland group of restaurants called Foodshed wanted to help its millennial employees save, but manager Corey Polyoka said that independent financial advisers kept pitching him “cumbersome, overpriced” retirement plans.
“It can be very tricky to come up with the plans, and it can be very costly to administer it for the business because of the management of them, the turnover of them, the matching of them,” Polyoka said. Any kind of uniform retirement planning approach at Foodshed “needs to have the personality to match the company culture,” he said.
Now Maryland has created a state-based, low-fee retirement savings program that Foodshed will be able to use. It’s simpler, will cost employees less and they can take their retirement savings with them if they change jobs, which millennials often do.
Other states that have already passed similar state-based retirement savings options include California, Connecticut, Illinois and Maryland.
When California Gov. Jerry Brown signed his state’s Secure Choice bill last summer, he was blunt about the interests that opposed the measure.
“I understand that Wall Street institutions strongly object to California and other states setting up such systems. They think the dollars that move into Secure Choice should instead flow into their own products. I consider this a feature, not a defect, of Secure Choice. Indeed, we hope to enroll those who historically [have] not been served by the savings industry,” Brown said.
In actuality, the choice does not to have be that stark. Because private financial firms manage state plans, those who want to serve consumers who are not yet saving will be able to attract new business. Of course, with requirements for low fees and strict accountability, there’s less room for excessive profits and more opportunity for workers to save. Many would argue that’s capitalism working at its best.
This year Colorado plans to be the next state to establish retirement options for the 45 percent of Coloradans who have no retirement at work. Rep. Brittany Pettersen, D-Lakewood, and Rep. Janet Buckner, D-Aurora are proposing the Colorado Secure Savings Plan. It’s a practical, innovative response to the retirement crisis in our state. We hope Colorado will rise above the partisanship Washington, D.C. and pass a common-sense bill that should attract bipartisan support.
In the meantime, all eyes should be on Cory Gardner. Let him know you want him to stand up for Coloradans not Wall Street special interests.