Washington Governor Jay Inslee signed bipartisan legislation into law today that will make it easier for thousands of private-sector, small business workers to access retirement savings programs through their employer and have the opportunity to build a financially secure future.
The Small Business Retirement Marketplace (SB 5826) will offer employers with fewer than 100 employees an easy to use retirement plan tool. Employees can automatically save a portion of their paycheck in a conservatively managed IRA or other savings plan, can increase or decrease their contributions at any time, and accounts would be portable as workers move from job to job. Employers who choose to participate can also choose to match up to 3% of employee contributions.
Currently, an estimated 1.5 million Washington workers do not have access to a retirement savings account through their employer. Lack of access to an employment-based retirement savings plan is most serious for low-wage workers, women, and people of color.
“The Small Business Retirement Marketplace is part of our efforts to promote asset-building opportunities for people traditionally left out on the sidelines from investment tools, or worse, targeted for predatory banking products,” said Gary Burris, Senior Policy Associate for the Economic Opportunity Institute. “We applaud the bipartisan effort in taking this big step toward ensuring Washingtonians retirement security, and we are hopeful that small businesses will access this important resource.”
Sponsored by Sen. Mark Mullet (D-Issaquah) and Rep. Larry Springer (D-Kirkland), it is supported by a wide array of organizations, including the Economic Opportunity Institute, AARP Washington, Russell Investments, Small Business Majority and the Securities Industry and Financial Markets Association (SIFMA).
“Washington is facing a significant retirement crisis: 12 percent of Washingtonians are now 65 plus; by 2030 that will grow to nearly 20 percent; and an estimated 462,000 people between ages 45-64 have less than $25,000 in savings,” said Doug Shadel, State Director, AARP Washington State. “Social Security is a critical piece of the puzzle but never meant to be the sole source of retirement income for retirees. Yet, 43 percent of today’s retirees rely on Social Security for 50 percent or more of their retirement income. The average benefit of $1,300 per month is simply not enough income to ensure people can live independently as they age.”
Both legislative sponsors know firsthand about the retirement savings challenge because both own small businesses and see this as a much easier solution to what is now a complex effort.
“Employers do not have to do anything but deduct and forward the money — the same way they handle taxes,” said Rep. Larry Springer, who noted, “We know people are very unlikely to save for retirement if they are not offered a plan through work. The Small Business Retirement Savings Marketplace will allow more workers access to a safe, easy, and affordable way to retire in dignity.”
“While we need to prepare for retirees in the near-term, we also need to make sure 20- and 30-year-olds are saving. We have to break a cycle of people reaching retirement age who are not able to keep working but are too poor to retire,” said Sen. Mark Mullet, who continued: “The Small Business Retirement Marketplace is a common sense approach that helps people move toward financial independence; both as the sponsor of the bill and as a small business owner I’m pleased to see this become law, and I look forward to my businesses being the first to offer my employees this valuable option.”
“Russell Investments is pleased to be part of this strong bi-partisan effort to help provide new opportunities for people to save for retirement,” said Josh Cohen, managing director, defined contribution at Russell Investments. ”It is our hope that this kind of public-private partnership can provide people a new path of retirement savings for years to come.”
“Washington State’s adoption of the Small Business Retirement Marketplace Program is a step forward in encouraging greater retirement savings,” said Marin E. Gibson, managing director for the Securities Industry and Financial Markets Association. “Small businesses often don’t have the resources to offer a retirement savings plan to their employees. This program pairs the public and private sectors in order to facilitate information flow to employees and fill the current savings gap facing America’s current and future retirees.”
The Small Business Retirement Marketplace will be designed and managed by the Department of Commerce including developing guidelines criteria for participation in the marketplace of interested private sector financial services firms that meet the requirements. Additionally they will identify and promote existing federal and state tax credits for employers participating in this plan.
Only one other similar program designed to support workplace retirement savings exists in the country, in Illinois. Washington’s Small Business Marketplace is scheduled to be available in 2017.