MEMO: The U.S. Senate Should Protect the Rights of States and Large Cities to Empower Private Workers to Save for Retirement
To: Editorial Page Editors, Editorial Board Members, and Capitol Reporters & Columnists
From: Stephen Herzenberg, Ph.D., Executive Director, Keystone Research Center
Date: February 27, 2017
Re : The U.S. Senate Should Protect the Rights of States and Large Cities to Empower Private Workers to Save for Retirement
A growing number of states are stepping up to empower tens of millions of private workers to save for retirement. Bipartisan legislative leaders in Philadelphia, and now the Pennsylvania state legislature, want to join this national movement, potentially benefitting 3 million Pennsylvania workers and their families.
So what does the U.S. House of Representatives do in response? They have seeked to block states and large cities from addressing the growing problem of retirement insecurity. The U.S. House did this February 15 by passing, on a party-line vote, resolutions that would repeal Obama Administration regulations that clarified how states and certain (large) cities can move forward to boost retirement security. Every one of the 13 Pennsylvania Republican members of the U.S. House voted for the resolutions repealing the Obama regulations. (All five of the Democratic members of Congress voted no, protecting the rights of states and certain cities to address the private sector retirement insecurity crisis.)
Let’s start with the good news. Beginning with California in 2012, five states (Oregon, Illinois, Connecticut, and Maryland being the others) have now stepped up to address the fact that more than half of private workers have no access to a retirement savings plan. These states have begun to set up saving options into which workers would automatically contribute if their employer now offers no retirement plan. Workers can choose not to participate, although up to 90 percent likely will with the “default” under these “auto-enrollment” plans that workers do participate (rather than, as with most existing plans, that workers do not participate). The Obama U.S. Department of Labor (USDOL) regulations confirmed that businesses that offer Individual Retirement Accounts (IRAs) as part of a new state/city program are exempt from ERISA requirements.
Here’s the even better news. Bipartisan lawmakers in Philadelphia and now Harrisburg want to join this national movement. In Philadelphia, Council members Cherelle Parker (D) and Al Taubenberger (R) co-chair the Task Force on Retirement Security for Private Sector Workers, which will make recommendations to the City Council. (I am a member of the Task Force.)
At the state level, Pennsylvania Senators Pat Browne (R) and Art Heywood (D) are circulating a co-sponsorship memo for a bill that would create a retirement savings plan for private workers without one. Their memo makes the essential points: “Too many Pennsylvanians struggle to save for retirement and don’t have access to financial services that can grow retirement savings…almost half of current workers are at risk of having insufficient income to meet basic expenses in retirement…fewer workers have retirement plans through their employer, and many financial products and services have fees and terms that make them inaccessible to the average individual…Our plan will not compete with existing private employer retirement plans as it would only apply to workers whose employers do not offer retirement plans…As the fourth-oldest state in the nation with a growing senior population, it is critical that we empower Pennsylvanians now to create retirement savings before they leave the workforce.”
But here’s the bad news. For reasons that are hard to fathom, Congress wants to undo the green light provided by the Obama Administration. As elaborated on our blog, it is hard to see this as anything other than pernicious. It’s indicative of a “repeal but don’t replace” mentality that’s fine with economic, health, and retirement unravelling on middle-class families as we further undo the New Deal—but please don’t step forward with ideas for how to rebuild security in new conditions.
We urge editorial boards across Pennsylvania to hold the members of Pennsylvania’s House Republican delegation accountable for their vote. We also urge them to call on Senators Casey and Toomey to join the bipartisan support within Pennsylvania for empowering more state workers to save for retirement—by voting “no” on H.J. Res. 66 and 67.