State Treasurer Beth Pearce is planning to work with lawmakers this year to set up a program to bring retirement savings plans to more Vermonters.
The program Pearce is pitching was recommended in a report last week from the Public Retirement Study Committee, which is made up of public and private sector employees. The committee recommended a retirement program that small businesses – those with 50 employees or fewer – could opt into, allowing their employees to set aside part of their pay, pre-tax, for retirement.
The the vast majority of Vermont companies have 50 or fewer employees, according to Pearce.
Pearce said retirement savings isn’t just important for individuals. If Vermont’s retirees are in better financial situations, she says, they’ll be actively fueling the economy with their spending, as opposed to worse-off retirees who spend relatively little money and sometimes require public assistance to meet basic needs.
“When you do not have adequate resources in retirement, individuals are more depending on state resources for financial assistance,” she said. “On the other hand, if you do have adequate income in retirement, you buy goods and services, you’re helping create employment, you’re part of the economic generator. So good stewardship in terms of planning for retirement is good for the individual and it’s good for the state.”
Pearce’s office released a report from the Center for Retirement Initiatives at Georgetown University’s McCourt School of Public Policy that helped inform the Public Retirement Study Committee’s recommendation.
The report cites data from AARP which says that about 45 percent of privately-employed workers in Vermont – 104,000 people – don’t have access to an employer-sponsored retirement plan. The numbers are worse for black and Hispanic Vermonters, more than half of whom lack access to employer-sponsored retirement plans.
The report also says the majority of workers at companies with fewer than 50 employees don’t have access to employer-sponsored plans. The program Pearce hopes to create with the Legislature is designed to help workers at those businesses.
“One of the barriers with smaller employers are the administrative requirements,” Pearce said. “They’d like to provide retirement programs, but they’re working very hard on their businesses, they’re working 24/7 to do the line of business and they do not have the administrative capacity to provide retirement plans.”
Pearce says a state-organized program operated by a contracted administrator would take some of the paperwork burden off of employers while still providing an attractive retirement program for workers.
“What we were proposing is to create a multiple-employer plan on a voluntary basis, so that if employers so choose, they may participate in the program to provide a retirement option to their employees,” Pearce said.
Pearce said the cost of running the public retirement program would be covered by fees paid by participants, and participants would also get help with financial literacy to make more informed decisions about managing their money.
The Public Retirement Study Committee will be working with lawmakers this spring to develop legislation to make the proposal into a reality.
“We will be presenting this to committees over at the General Assembly this year, working closely with Gov Ops [Government Operations committee], Commerce committees, economic development, and hopefully develop some enabling legislation this year to move forward,” Pearce said.
Pearce said the plan calls for a state board to oversee the administration of the public retirement plan, though the state would hire a contractor to run the day-to-day operation of the program.