Michigan retirement plan would help 1.5 million workers access savings program, lawmaker says

(FOX 2) - The push is on to improve access to retirement plans in Michigan with one lawmaker's plan to create a savings program that would be available to any resident who works in the state.

Amid concerns that more than a million people working in the private sector in Michigan aren't offered a means to save money through their job, state Rep. Mike McFall (D-Hazel Park) has proposed an automated savings program that would work similar to an individual retirement account - or IRA.

"I just turned 50 years old, and I know retirement isn't right around the corner for me - but it had me thinking, I've learned many people are not prepared," McFall said. "They are getting close to that age of retirement and a large number aren't prepared."

Approximately 42% of the state's workforce between the ages of 18 to 64 that are employed by a business - about 1.5 million - don't have a plan offered through work. That doesn't mean plans aren't available for those who go looking, but the process can be intimidating to those who've never put money into a retirement account before, McFall said.

Additionally, the shaky ground that Social Security finds itself on could make retiring even harder, the lawmaker said.

"It's always a hot topic whether it will stick around or change if they keep pushing back the age. So what ends up happening is sometimes seniors end up on public assistance," he said.

His solution is a public-private partnership similar to Michigan's college savings program, which would be overseen by the treasury department and a board selected by the governor. As for the money management of the plan, bids would be put out for a private company to run it.

How MI Secure Retirement would work is when someone is hired at a company that doesn't offer its own retirement plan, they would automatically be enrolled into the program with an option of opting out. The new-hire would get to determine how much of their paycheck would go to the fund.

The fund would be at no cost to the business and eventually be self-sufficient within four years, McFall said.

"The goal is to make sure seniors don't end up on public assistance and can age in place where they don't have to leave because they were prepared," he added.

Both Pew Charitable Trusts and AARP Michigan have endorsed the idea, with the former calculating billions in expected spending will be needed from the state if the current number of workers continues not saving for retirement.

MORE: Former Nigerian scammer details playbook of how he deceived people out of money

McFall said even lawmakers from the other side of the aisle support the bill because of the long-term savings to the state.

But where the lawmaker sees a means of helping others save money, the organization representing small businesses sees another bullet on an ever-growing list of requirements they have to follow.

The president of the Small Business Association of Michigan called a state retirement plan a "noble goal" but one it cannot support if it includes the mandate that businesses offer access to the program. 

"It would be up to businesses to administer the program and to people with a lot of experience with certain systems and programs, it's second nature," said Brian Calley. "But to a small business owner, who is chief sales person, who fixes the paper jam in the printer, who is the HR director and wears a hundred different hats, it's never that simple."

Related

article

Tax Day 2024: Delayed filing allowed for Michigan counties impacted by flooding, severe storms

Residents of nine Michigan counties impacted by severe weather last summer have a few extra months to file their taxes. Monday is Tax Day, but residents in Eaton, Ingham, Ionia, Kent, Livingston, Macomb, Monroe, Oakland, and Wayne counties don't have to file their individual or business tax returns until June 17.

In selling the legislation, McFall said it would take a company about 10 minutes to walk an employee through the retirement program. He also said it would make working at a small business more attractive next to a corporation with its own plan.

But small businesses already have enough to worry about, Calley said, and a mandate offering access to a retirement plan when there are options already on the market would only burden a company more.

He included examples like the new Corporate Transparency Act and a potential ruling on the state's Adopt and Amend rule as additional rules small businesses will need to accommodate in the near future. The way Calley sees it, when does it end?

"It's just more and more," Calley said. "I understand people might look at this as ‘one thing,’ but it's that one thing in addition to the other hundred things."

More than a dozen states already offer some form of a state retirement fund, and those that do have seen good participation, McFall said.

HB 5461 is expected to get a hearing before the House Labor Committee on April 18.