State plans retirement savings program for private sector workers

More than half of Nevadans working in the private sector do not have the option of automatically deducting retirement savings from their paychecks.

It’s a problem that will catch up with people – and state social service programs – once they reach retirement age.

“This problem will not resolve itself,” said Jessica Eckman, senior legislative representative for AARP.

One solution currently being considered by the Nevada state legislature is the creation of an automatic retirement savings program for workers in the private sector. Senate Bill 200 passed by the Senate Committee on Government Affairs on April 5 and is currently awaiting a finance hearing.

If passed, workers who do not have access to an employer-based retirement plan would automatically enroll in a state-facilitated Private Individual Retirement Account (IRA) program and save a set percentage of every paycheck. If the worker wishes, he can withdraw from the automatic retirement savings program at any time.

Employers, on the other hand, would be required to disseminate state information about the program and apply payroll deduction, in the same way that they deduct items such as federal taxes, social security contributions, and deductions. health insurance premiums.

In Nevada, 57% of workers in the private sector – or 557,000 people – are employed by companies that do not offer a pension plan, according to the AARP. The percentage is even higher among employees who work for small businesses.

While anyone has the option of establishing an IRA or other form of savings on their own, only a fraction of people do.

“Expecting to know the difference between Vanguard, MassMutual, Fidelity – and an ETF (exchange-traded fund) versus a mutual fund – is a very, very high burden,” the state senator said. Dallas Harris (D-Las Vegas), one of Bill’s two sponsors. “We know that most people save through their employer. This is the easiest way to do it, before it hits their pockets.

According to the AARP Public Policy Institute, employees are 15 times more likely to save with access to a workplace pension plan and 20 times more likely to save when deductions are automatic.

A dozen states, including Oregon and California, have launched automatic savings retirement programs for workers in the private sector.

Illinois launched its version, SecureChoice, in 2018. Program director Courtney Eccles told lawmakers in Nevada that her program currently serves 85,000 workers and has saved more than $ 55 million.

The average monthly contribution is $ 100.

Eccles said Illinois believes many registrants are first-time savers and low-income people who have welcomed the sense of “relief and security” that comes with having even a minimum of savings. savings for the future.

Harris recognized that beyond the convenience factor of automatic deductions and the financial skills needed to be able to enroll in a private IRA, other factors can also affect workers’ ability to save.

“I am very aware that there are people who need every penny of what they earn,” Harris said.

She went on to say that the program would include provisions for workers to get their automatically deducted money back without penalty within a specified time – 60 or 120 days, for example.

“It’s going to be designed to have a really long exit ramp for anyone looking at the impact and saying, ‘I just can’t do that,'” added Harris.

The AARP estimates that Nevada would save millions on public assistance programs if low-income retirees could increase their retirement income by an additional $ 1,000 a year. According to the group, the average Social Security benefit in Nevada is $ 19,000 per year, while the average cost of food, utilities and health care for older families averages $ 23,000 per year. year.

AARP’s Eckman told lawmakers that many historically disadvantaged groups are disproportionately affected by lack of access to employer pension plans. Women, for example, have a higher rate of part-time employment, which may affect eligibility for employer-sponsored plans. People of color are also much less likely to have employer-sponsored plans or IRAs.

SB200 has received support from progressive groups. Several business groups are opposed to it.

The American Council of Life Insurers stated in its oral testimony and written comments that they believe that federal legislation passed in December 2019 offers a better way to improve access to pension plans. This law, called the SECURE Act, focuses on market-based incentives, such as significant tax cuts, to encourage self-enrolling pension plans and common employer plans.

The Las Vegas Chamber of Commerce offers a bundled 401k plan for its smaller members, as does the Reno-Sparks Chamber of Commerce.

Opponents also raised concerns about the burden on businesses by the cost of upgrading their software to comply with the automatic deduction and the impact the legislation could have on businesses currently selling tax plans. ‘pension saving.

Nevada has already considered a self-saving retirement program. A bill introduced by then-MP Ellen Spiegel during the 2019 legislature adopted its original committee but failed to secure a hearing during the House Ways and Means Committee.

About Ellen Lewandowski

Check Also

Exploring the California Wildfire Insurance Legislative Landscape

By Jan Larson and Jenna Conwisar (May 26, 2022, 5:26 p.m. EDT) — In California, …

Leave a Reply

Your email address will not be published.