Retirement Savings Plan for Private Workers Only Partial Solution

May 6, 2016

Hartford Courant
April 30, 2016

The Connecticut House just passed a bill to mandate that employers who don’t have retirement plans for their workers participate in a new state-sponsored plan, essentially a public IRA, which gives workers the option of saving for retirement. The Senate should pass the bill and Gov. Dannel P. Malloy should sign it, but without illusions about what it will accomplish.

Opponents of the bill, including the Connecticut Business & Industry Association, say that the private sector provides sufficient retirement savings plans. The bill’s proponents counter with the undeniable statistic that half of Connecticut workers have no retirement plan and will be completely dependent on Social Security, which provides only a fraction of necessary retirement income. They imply that the new plan would make up the gap, solving the retirement crisis.

Neither side is right. We wouldn’t have a growing retirement crisis if private plans had been sufficient, and the public approach under this bill, HB 5591, while useful, will not be nearly enough to allow participants to retire with sufficient income.
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The New State Retirement Savings Plans: Public Options vs. Corporate Business Development

October 16, 2015

Huffington Post (October 15, 2015)

A key source of the growing retirement crisis is that employers of over half of private sector workers do not provide retirement plans beyond mandatory Social Security, which was not designed to proved full retirement security. In response, twenty-five states are developing retirement savings plans to which the affected workers could contribute.

Those plans, even in combination with Social Security, will not be enough to resolve the retirement crisis, but they could be helpful if designed as true public options to the retirement savings vehicles available from the private financial services industry.

Private retirement savings plans do a good job of providing profitable revenue for the financial services industry but at the expense of future retirement income for participants.

Public option plans, on the other hand, without profit needs could be designed to maximize retirement income for participants. Doing so would require patching the two major sources of profit leakage: corporate profiting from administration and investment of retirement savings plans; and profiting from the sale, administration, and control of retirement annuities.

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