Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • Consultants
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2023
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
July 07, 2014 01:00 AM

States should step in to offer retirement options

Yvonne R. Walker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Yvonne R. Walker is president of Service Employees International Union, Local 1000, Sacramento, Calif., and serves as a member of the California Secure Choice Retirement Savings Investment Board.

    Barbara Williams is a former aerospace worker in California who lost her piece of the American dream when that industry downsized. She lost her job, benefits and hope for a dignified retirement.

    Now, at age 66, Barbara works as an early childhood education provider — an occupation that provides more emotional gratification than wages and benefits. Without access to an employer-sponsored retirement plan, Barbara and more than 6 million other Californians will face the choice of retiring into poverty or working until death.

    Stories like Barbara's are often left out of the discussion when we talk about solutions to America's looming retirement crisis, particularly state-based retirement plans. That's why I feel that it's necessary to respond to Pensions & Investments' recent editorial (“States reaching out too far,” June 9) which makes arguments against publicly administered retirement savings plans for private-sector workers.

    Not only is Barbara's story relevant, but also it's a driving force behind the 2012 passage of the California Secure Choice Retirement Savings Plan Act and similar proposals. The tax-based solution proposed in the editorial does not remotely address the underlying problem of retirement insecurity, and would do nothing to fix the system that has failed millions of workers like Barbara.

    Due to the erosion of traditional pension plans in the private sector, stagnant wages and rising personal debt, the median retirement account balance is $3,000 for all working-age households and $12,000 for households near retirement age, whether they have access to a retirement plan or not, according to a study last year by the National Institute on Retirement Security.

    The ticking time bomb of insufficient private-sector retirement savings is a real problem that will haunt state and federal governments for decades if we do not take measures to help current workers save enough money so they are not mired in poverty during old age.

    The editorial states: “Before enacting public-private plans, states as well as the federal government ought to remove governmental impediments to enterprise growth, such as taxes and regulations, to encourage more business and job expansion.”

    Where is the evidence that cutting taxes encourages employers to increase retirement benefits for employees? Employers already receive a tax benefit for contributing matching funds to 401(k) plans as well as for contributions to traditional pension plans. Evidence shows that fewer and fewer employers are taking advantage of these existing tax benefits to match employee contributions or contribute to defined benefit plans.

    According to a 2012 University of California, Berkeley, study, only 45% of private-sector employees (ages 25 to 64) in California work for an employer that sponsored a retirement plan and only 37% actually participate in the plan.

    With benefits being little more than $17,000 per year for men and about $13,000 per year for women, Social Security alone clearly is not going to close the retirement gap for these millions of workers. That's why California lawmakers took the bold step of adopting the Secure Choice bill, which starts with a feasibility study before any implementation. Our Secure Choice plan would offer low- to middle-income workers something they desperately need: a safe, affordable way to save for retirement through payroll deduction.

    While there are many retirement products in the market, the high percentage of workers — especially low- and middle-income earners — who have no retirement account and the inadequate median balances of those who do speaks to the failure of the market to provide for the retirement needs of far too many Americans. Billions spent by the government on retirement tax incentives and by the financial service industry on marketing have failed to convince most small businesses or tens of millions of low- and middle-income workers to establish voluntary retirement plans.

    California's Secure Choice program plans to auto enroll workers (who will always have the ability to opt out) whose jobs do not offer a retirement plan into an individual retirement account that will provide them with modest income to supplement Social Security. IRAs are not subject to ERISA; contrary to the editorial's assertion, neither California nor any other state of which I am aware is calling on Congress to ease ERISA. We believe Secure Choice and California's consumer protection laws will provide strong safeguards to participants against any potential misfeasance by participating employers or financial service firms that provide services to the plan.

    Unlike 401(k)-style defined contribution plans, Secure Choice accounts will be pooled and professionally managed so workers aren't left acting as their own actuary, risk manager and investment professional. California already has experience in administering a plan — CalPERS — for millions of current and retired public employees. We hope to adapt some of the best practices of the California Public Employees' Retirement System to help millions of private-sector workers enjoy some modest retirement security.

    While the editorial board of P&I and I agree that we must address retirement insecurity, retirement advocates know that cutting taxes isn't going to make this problem magically go away. Also, given the partisan gridlock in Washington, it would be foolhardy to wait for Congress to solve this problem. That's why more than a dozen other states have joined California in seeking innovative solutions to this national problem. We are not saying we have all the answers — we're still early in the process of creating this plan — but at least we are committed to finding a solution for workers like Barbara Williams so they're not left with a no-win situation of working until they die or retiring in poverty. n


    Yvonne R. Walker is president of Service Employees International Union, Local 1000, Sacramento, Calif., and serves as a member of the California Secure Choice Retirement Savings Investment Board.

    Related Articles
    States pushing to offer retirement accounts to private sector
    Senator calls for expanding TSP to private sector
    States reaching out too far
    Book pushes changes to forestall retirement crisis
    California Secure Choice scouting for help with feasibility study, plan design
    State programs get help from the president
    Washington latest state to encourage workplace retirement plans
    Democratic senators urge Obama to clarify rules on state-sponsored private-sect…
    Auto IRAs would benefit workers, but higher contributions needed, EBRI report s…
    GFOR: States working to solve 'crisis of unpreparedness'
    DOL stance boosts private-sector plan efforts
    Recommended for You
    401k_Jar_i.jpg
    Employers urged to change 401(k) contributions to shrink racial, income disparities
    ONLINE_190309934_AR_0_VQZMEAPVBFII.jpg
    Aon's PEP reaches $2 billion in assets, commitments
    Vanguard_Sign_1550_i.jpg
    Judge nixes Vanguard's petition to toss lawsuit over TDF policy
    Open Window of Opportunity in Real Estate
    Sponsored Content: Open Window of Opportunity in Real Estate
    Sponsored
    White Papers
    A Guide to Home Equity Investments: The Untapped Real Estate Asset Class
    Modernize your K-12 retirement plan with vendor consolidation
    Q4 2023 Credit Outlook: Price Is What You Pay, Value Is What You Get
    There's More Than One Way to Be a Climate Investor
    Exploring the Commercial Application of Artificial Intelligence
    Private Credit Insights: Every Problem Is an Opportunity in Disguise
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • Consultants
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2023
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print