On Retirement Security, Senators Casey and Toomey, Which Side Are You On?

There's another "which side are you on?" issue under consideration in Washington D.C., and it could come before Senators Casey and Toomey in a vote as early as this week.

The issue is retirement security in the private sector.

Every one of Pennsylvania's 13 Republicans in the U.S. House of Representatives has already spoken. They are against itretirement security in the private sector that is. That means they are also against Main Street and for Wall Street. Good to know. 

This week (or soon), unless Senate leaders have second thoughts, we will find out which side our U.S. Senators are on.

Here are the details. Over several decades, retirement security in the U.S. private sector has collapsed. Today, according to the Requirement Equity Lab at the New School for Social Research, more than half the workforce nationally—87 million workers—do not have access to a retirement plan at work, not even a lousy 401(k) plan. In Pennsylvania alone, 3.3 million workers do not have access to a retirement plan at work.

Recognizing the need do SOMETHING to bolster private sector retirement security, a Washington state think tank over 15 years ago began advocating having states make it possible for workers at businesses with no retirement plan to have a retirement savings account. Recognizing a good idea when we saw one, we advocated this concept in 2002 (see p. 56 of The State of Working Pennsylvania 2002). A legislative staffer adapted the Washington state legislation into a Pennsylvania bill that was introduced for several legislative sessions, but never passed.

In the last five years, the common-sense idea that states should make it possible for private sector workers to save for retirement has gathered momenum. California, in 2012, and now four other states (Oregon, Illinois, Connecticut and Maryland) have begun to study, and set up, so-called "Secure Choice" or "Retirement Security for All" plans. The city of New York and Philadelphia are also exploring such plans. Philadelphia City Council has a Task Force on the Retirement Security of Private Sector Employees, which is developing recommendations, co-chaired by Democratic council member Cherelle Parker and Repulican Bill Taubenberger. (Full disclosure: I'm a member of the Task Force.)

The first operational state plans will give private workers who currently have no retirement plan access to "individual retirement accounts" that include no employer contributions. Workers will automatically contribute, unless they explicitly opt not to do so. Making the default that workers contribute can increase participation rates to over 90%, compared to low participation in traditional 401(k) plans under which the default is that workers do not contribute.

These plans are not a panacea for middle-class retirement insecurityit's hard to save enough for retirement with no employer contribution, especially for moderate-income workers. But these plans are a start.

The Obama Administration gave a green light to states and big cities taking the initiative on private sector retirement last year by enacting new U.S. Department of Labor regulations. These regulations clarified how states and cities can set up plans in coordination with the federal ERISA law. The regulations confirmed that businesses that offer Individual Retirement Accounts (IRAs) as part of mandatory state/city programs are exempt from ERISA requirements.

With other states providing a model, and with the new federal regulations, interest in retirement security for all plans has increased in the Pennsylvania legislature. A co-sponsorship memo is being circulated in the Pennsylvania Senate by Republican Pat Browne and Democrat Art Haywood and staff members of House members are also gathering information on the models in other states. In late 2015, a member of the Republican leadership in the Pennsylvania Senate referred to this basic approach as a "no brainer," addding "who could be against it?"

Who indeed?

Answer: the 2017 Republican majority in the U.S. House of Representatives.

On February 15, 230 of the 246 Republican members of Congress voted to block the Obama regulations (three voted no, five abstained, and six weren't there) on H.J. Res 66, which removes the green light for states to set up retirement plans; 233 voted yes on HJ Res 67, which removes the green light for cities to set up retirement savings plans, with one no, and four abstentions. As noted above, every one of the 13 Pennsylvania Republicans in Congress voted in favor of blocking the Obama regulations while the five Democratic members of Congress voted to retain the new regulations clarifying how states and big cities can move forward to empower private workers to save for retirement. 

Even in these polarized times, I found this vote depressing. Among the Republicans we know in Pennsylvania, this is a very bipartisan idea. It is consistent with ideas of self-relianceyou're making it easier for people to use their own contributions to save for retirement. It's fiscally prudent and should make people less reliant on social programs in retirement. It's consistent with the idea of states' rights. It's also a boon for small business. It relieves them of responsibility for setting up a retirement plan, but still leaves the option of setting up their own if they want to do so. Perhaps this is why 86 percent of small business owners support such plans. Perhaps this is also why Small Busines Majority "urges Congress to uphold the Labor Department's rule and allow states to decide how best to serve their small businesses and private sector workers."

The organizations that want to block states and big cities from empowering more private workers to save for retirement include the U.S. Chamber of Commerce and a coalition that includes securities and financial services firmsto use a shorthand, Wall Street. Feel free to try to decipher the Chamber's arguments yourself. In our view, they are a lot of smoke and mirrors (reiminiscent of the arguments made by payday lenders in Pennsylvania for the past several years).

The real objections? It's possible that the right-wing business lobby doesn't want government doing something (else) helpful to families. Second, states and cities may negoitate lower fees for investment options than individual savers can get on their own. They may also limit the number of investment options so that individuals are not tricked into making poor choices. In both ways, state and local plans may make it harder for Wall Street financial firms to rip off Main State retirement savers. Of course, since these people aren't saving now, these state and city plans will actually create more business for financial firms than no business. But apparently that upside doesn't count for any more with the U.S. Chamber and its allies than the positive impact the state and city initiatives would have on tens of millions of people's lives.

So which side are you on Senators Casey and Toomey?

Main Street or Wall Street?

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