Building wealth through retirement savings and small business in 2015, looking forward to 2016

Written by Dory Rand on December 10, 2015 - 12:00am

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Former Governor Quinn signs Secure Choice into law in January 2015.

2015 was a big year for Woodstock Institute and allies working to expand opportunities for workers to save for retirement and to receive unbiased investment advice. Please take action on two retirement issues described below. 

Retirement savings successes, but advocacy needed

The Illinois Secure Choice Retirement Savings Act was signed into law in January, after three years of advocacy with Illinois Asset Building Group and a broad coalition of worker, business, retiree, and other advocacy groups. Woodstock’s 2012 report entitled Coming Up Short set the stage by documenting that 2.5 million private-sector workers in every corner of Illinois lack access to an employment-based retirement savings plan and likely have little or no savings for retirement. Under the new law, Illinois employers with 25 or more employees and that do not offer a retirement savings plan will be required to automatically enroll their workers in a payroll deduction Roth IRA account, with the worker having the choice to opt out. The amounts saved can mean the difference between a worker retiring with dignity and retiring into poverty. Illinois is the first state to create such a program, which has been lauded as a model for other states to help the 68 million workers who don’t have access to retirement savings plans through their jobs.

On the heels of that victory, U.S. Department of Labor (DOL) Secretary Tom Perez announced in Chicago on November 16 a new proposed rule that establishes a safe harbor for state-established and administered programs like Secure Choice, so that employers who are required to participate will not be burdened by federal ERISA laws that apply to employer-sponsored retirement programs. This rule will be critically important in allowing states to implement these programs. Please sign and send this letter to DOL in support of the proposed rule before the January 19, 2016, deadline, and send a copy to me at drand@woodstockinst.org.

We also need your support for another DOL proposed rule related to retirement savings. Under current law, retirement investment advisors are under no obligation to give advice that is in the best interests of the consumer. Advisors are free to suggest investments that pay them the highest commission or fees rather than those that best meet the consumer’s needs. Under a proposed DOL rule, advisors would be required to use a fiduciary (best interests of the consumer) standard in providing retirement investment advice. Woodstock strongly supports this rule, as do most consumers and policymakers. Unfortunately, Illinois Congressman Peter Roskam opposes the rule and has tried to derail it. Please tell Rep. Roskam that you support the fiduciary rule and ask him to stop trying to derail it.

Small Business progress and threats

Woodstock was pleased to work with local partners such as Accion Chicago and national leaders in developing high road standards for small business lending entitled the Small Business Borrowers’ Bill of Rights (BBOR). As online “marketplace” lenders such as OnDeck Capital invade the void created by lack of bank lending to small businesses, especially in low- and moderate-income areas and communities of color, small business owners need access to safe and affordable capital, not predatory, high-interest loans that will trap them in a cycle of debt. Woodstock participated in the Treasury Department’s roundtable on marketplace lending and the BBOR launch in Washington, DC, this past August, and we look forward to policymakers taking action to properly regulate this field and protect small business owners from the predatory lending that has been so common in the mortgage and small dollar consumer lending markets. We were pleased to see that in 2016 the Consumer Financial Protection Bureau (CFPB) will hire a new assistant director for small business lending and begin to use its authority under the Dodd-Frank Act (section 1071) to collect better data on small business loan applications and originations.

Please take action to accelerate progress on these small business developments:

1.       Urge the CFPB Director richard.cordray@cfpb.gov to act quickly to exercise its section 1071 authority.

2.       Urge all small business lenders to adopt the BBOR and implement its standards.

3.       Oppose predatory small business lenders and bank partnerships with lenders that do not adopt and implement the BBOR.

4.       Urge banks to invest in Community Development Financial Institutions (CDFIs) such as Opportunity Finance Network member organizations that provide technical assistance and make sustainable loans to small businesses.

5.       If you or someone you know has had a bad experience with a small business lender or marketplace lender, send your complaint or story to the CFPB.

 

Looking forward to 2016, we will build on these successes and conduct even more research, policy advocacy, and coalition building to address the financial needs of low-wage workers and small business owners.

If you can make a contribution to support Woodstock’s work, I would greatly appreciate it.

I hope you enjoy the holidays and I look forward to working with you next year!

Dory