Millions of low-wage workers and small business employees in the United States are approaching retirement with inadequate savings to supplement Social Security benefits that will replace less than half of their pre-retirement income. Those workers face a bleak financial future in which their standard of living will be much lower than what they now enjoy as they try to subsist on near poverty-level incomes.
A year ago, Illinois became the first state in the nation to pass a law to address that looming retirement crisis. Spurred, in part, by Woodstock Institute research that showed that 2.5 million private-sector workers in Illinois lacked access to any employment-based retirement savings plan, such as a 401(k), the state passed the Illinois Secure Choice Savings Program. The Illinois law requires employers with 25 or more employees and that do not have a retirement plan to enroll their workers in a state-sponsored retirement plan, although any worker can opt-out of the plan. The state is currently in the process of setting up the plan and will begin enrolling workers in 2017.
Former Woodstock Institute Vice President of Policy Courtney Eccles noted, “Woodstock’s research was crucial for passing legislation creating Secure Choice. It raised awareness about the growing retirement crisis and documented the lack of access to employment-based retirement savings programs for workers in every legislative district across the state. The report helped policymakers realize that something needed to be done, and Secure Choice was a reasonable, cost-effective, and smart solution.”
This past week, the New Jersey legislature passed its version of the Secure Choice Savings Program, following closely the model that Illinois established. In addition to receiving bi-partisan support in both houses of the legislature, the bill was supported by numerous business organizations in the state, including the Asian-Indian, African American, and Chinese-American Chambers of Commerce. Unfortunately, the governor vetoed the plan, opting instead for a plan that is voluntary for all employers.
For the sake of workers in New Jersey, we hope that employers in that state will choose to participate in one of the plans selected by the state, but behavioral economic research and current experience with voluntary employer participation in marketplace retirement savings plans suggest that the Secure Choice model will do more to help more workers save for retirement. Woodstock Institute is pleased to see another state legislature attempt to follow Illinois’ lead in addressing the retirement savings crisis, and the fact that the bill in New Jersey had bi-partisan political and business support suggests that the Secure Choice model could provide the basis for a national agreement on this important first step to helping all workers save for their retirement.