Why would Congress try to undermine bipartisan state solutions to the retirement savings deficit faced by many Americans? But that’s what’s at stake as the Senate considers two resolutions already approved by the House. If they pass, they will not only cut off a way for the country to save money, they will void the Labor Department’s attempt to allow the states to serve as the laboratories of innovation that our Founders intended.
Today, 55 million working Americans do not have a way to save for retirement out of their regular paycheck. The lack of employer-sponsored savings opportunities has a direct impact on the retirement security of American workers. Social Security is only a foundation for retirement income — not the whole house. Yet, as an AARP study showed, they are 15 times more likely to save if they have access to a payroll deduction savings plan at work.
The states are closer to the people, and they are often more willing and able to test creative solutions. More than 30 states, among them Arkansas, California, Connecticut, New York and Utah, have taken or are considering steps to remove regulatory barriers for small businesses that want to offer workers a retirement savings vehicle. Work and Save plans work like the successful 529 college savings plans. In 20 years, Americans have used them to put away more than $253.2 billion in pretax dollars.
Work and Save is a market-based approach. Neither the state nor the employer is responsible for a person’s gains or losses. Employees can opt out if they do not want to contribute, and they can choose how much they want to put away and what they want to invest in. These retirement saving plans will mean less reliance on the government safety nets. In fact, if states were to take action today, according to a Segal study, they could save taxpayers as much as $4.8 billion in the next 10 years. As for small business owners, their only involvement is to give employees information and provide the payroll deduction, which they are already doing for things like taxes and health care.
The House resolutions intentionally create roadblocks for states that want to develop Work and Save plans. The 2016 Labor guidance promotes devolution, more flexibility and expanded savings, with adequate consumer protections. The main argument of the resolutions’ supporters — that employees are not adequately protected — is simply false. The guidance provides a “safe harbor,” which includes standards for consumer protections in state statute. Failure to satisfy the "safe harbor" standards would be a cause of action under both state and federal law.
AARP strongly urges the Senate to let these resolutions die — to let states continue to lead the way on retirement saving innovations. Many states have invested considerable time and effort in developing Work and Save programs. As a former assistant secretary of labor, I believe it's time to encourage them and give devolution a chance.
David Walker, an AARP board member, is a former U.S. comptroller general and a former assistant secretary of Labor for the Employee Retirement Income Security Act.
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