Since the New Deal, many workers have assumed that they would get pensions from the company they worked for. From 1949 to 1975, the number of people who were covered by private pension plans went from 3.7 million to 40 million. More recently, however, the percentage of working people who have been receiving pensions from their place of employment has been trending down.
Nationally, nearly a third of working people have no retirement savings or pension:
Even more recent federal numbers show the participation rate of employee-sponsored retirement benefits was only 54 percent for civilian workers, 49 percent for private industry workers and 81 percent for state and local government workers:
In New York City, the numbers are even worse: “…only 41 percent of working New Yorkers having access today. This means that 1.8 million working New Yorkers do not have access to a retirement plan through their employer.”
Many might assume that private sector workers don’t have pension plans because they don’t want them. Research, however, contradicts this. According to the Government Accountability Office (GAO), the vast majority of private sector workers are not participating in retirement savings programs because they are not being offered:
According to the GAO:
Certain types of workers, such as those with lower incomes, are much less likely to have coverage compared to other workers. Lower-income workers, in particular, are much less likely to have access to workplace retirement programs and to choose to participate when programs are available. Compared to workers in the lowest income quartile, our analysis found workers in the highest income quartile were nearly 4 times as likely to work for an employer that offers a program, after controlling for other factors.
The New York State Constitution already includes very important guarantees for state pensions, so the concept of pension protections is already in the document. The lack of a viable Federal solution to the retirement crisis creates a need for the state to expand pension rights to non-state employees.
New York must follow the examples of Connecticut, California, Illinois and other states and tackle this problem. A pooled pension for all New Yorkers is a direct solution to this crisis in retirement security.
The pension would feature a centrally pooled retirement trust fund, open to all private-sector New York workers who currently have no access to a pension, and offering the investment, accumulation, and annuity advantages learned from well-managed public employee retirement systems in New York City and State. In addition, a pooled system for workers from many businesses would enjoy economies of scale not available to individual businesses administering 401(k) and other such plans.
Such a central pool would provide private employees with a public option pension plan, offer secure retirement savings with lower fees and higher returns than 401(k)s, and create a competitive advantage for businesses locating in New York.
The pension plan would automatically deduct a small portion of the worker’s income to the plan. Automaticity is important — a study conducted by the AARP shows that workers are 15 times more likely to save for their retirement if the money is automatically deducted from their paychecks.
Ultimately, a centrally pooled trust would allow for two more major advances in retirement savings and investment: – First, a New York workers’ trust would have a clear interest in re-investing the maximum possible amount of its fund into businesses and public projects in New York, allowing the collective retirement savings of New York workers to boost the New York regional economy. This can be done while still meeting all fiduciary responsibilities to the workers. –
Second, the economic gains brought on by the plan and the reduced need for public assistance for needy seniors should allow for a direct government contribution to the plans for low-income workers (along the lines of the Earned Income Tax Credit), thereby establishing a true Pension for ALL New Yorkers.
Recent History of Retirement Savings Plans For Workers Without Pensions in New York
In early 2016 Governor Cuomo announced the NY SMART Commission to “to study available options for the creation of a state-administered retirement savings program for workers whose employers do not offer a retirement plan.” The Commission held its first meeting September 30, 2016. Little has been heard from the Commission since, and the Governor has not mentioned it.
Meanwhile, AARP New York supports legislation called “Secure Choice” which would give employees the who don’t have workplace retirement plans the chance to open a Roth IRA at work and contribute their own money through an automatic payroll deduction. Although the bill has nearly 100 sponsors from both parties in both houses, there was no mention of support of the legislation by the governor, and no monies were assigned for it in the state budget.
In New York City, in early 2016 Mayor de Blasio proposed that New York be the first city in the country with its own pooled pension retirement plan for workers who lack access to an employer-sponsored one. This plan, however, was dependent on the Federal Department of Labor changing its rules to exempt cities from ERISA (The Employee Retirement Income Security Act of 1974).
Near the end of the Obama Administration, Labor Secretary Tom Perez announced exemptions for cities and states. This would have enabled them to offer retirement plans without the additional costs ERISA would require.
However, by using an obscure 1996 law known as the Congressional Review Act, the House of Representatives voted against the exemptions for both cities and states. The Senate voted 50-49 to kill the exemption for cities.. Some weeks later, they voted the same 50-49 to end the exemption on state plans.
But numerous states have already started to implement plans and are expected to continue them even without the exemption. In addition, if the Trump Administration kills the fiduciary rule, it would eliminate the need for an ERISA exemption. As reported on CNN: “Oregon Treasurer Tobias Read has said that his state doesn’t necessarily need the exemption from ERISA to proceed, but that he viewed it as an advantage to have additional clarity on the rules.”
In fact, one financial expert, Chad Parks, CEO of Ubiquity Savings + Retirement, has said unless the states “completely panic and receive bad counsel, they should proceed with their plans as intended.”