Another Day, Another National Retirement Plan Acronym
July 21, 2016
Congressman Joe Crowley of New York is just the latest politician to formally rollout his legislative version of a national retirement plan. The Act is titled the “Secure, Accessible, Valuable, Efficient Universal Pension Accounts” (SAVE UP Accounts). Its target customers are workers whose employers do not currently offer a retirement savings plan. It has many of the same features as other federal and state retirement plan proposals:
- Automatic enrollment in an IRA-like plan
- Pre-tax employee contributions
- Limited number of low-cost investment funds
- Opt-out option
- Requires an employer contribution indexed for inflation and based on employee hours worked (waived if employer is contributing to an existing retirement account)
- Provides a limited employer tax credit to offset the cost of employer contributions
- Sets target benefit amounts
- Creates a collective investment pool to protect against losses
According to an article in Plan Sponsor, a recent report by Natixis Global Asset Management ranked the United States tenth among wealthy nations for retirement security. Some of the reasons put forth in the report for the tenth place ranking are income inequality, lack of access to a workplace retirement plan and a low contribution rate. The report suggests that the U.S. “learn from the experiences of other countries around the world.”
But the people in the countries ranked one through nine have numerous advantages over U.S. citizens when it comes to saving. Chief among them is lower health care costs and less income inequality, not to mention the many social programs like paid leave and childcare benefits.
Representative Crowley deserves credit for recognizing what every other retirement savings proposal and study ignores or pays lip service to: How do you save for retirement when you don’t make enough money to afford current basic needs? To date, every government proposed retirement plan assumes every worker has the financial means to save, and all that is needed is access to a plan and education on how to save. That’s not the case, especially for low-wage workers who are more likely to work for employers that do not offer a retirement plan.
Representative Crowley acknowledges the real-world obstacles to saving in a report he produced last year. Before this month’s announcement of the SAVE UP Accounts, Representative Crowley included an outline of these accounts in a 2015 report titled, “Building Better Savings, Building Better Futures.” This report included several complementary proposals aimed at helping middle and low paid workers save for retirement and other needs. There is a proposal to create USAccounts for every American child at birth, where the government deposits $500 in the account and provides annual limited matching contributions for qualified families. A proposed increase to the Child Tax Credit is also part of the report, as well as enhancements to the SAVERs Credit program and more.
What Crowley Gets Wrong
As much as those of us who support policies to assist low-wage workers in saving for retirement may like the proposals outlined in Representative Crowley’s report, we know they will never happen. This Congress would never sign off on appropriating funds to give to poor workers. They are more than willing to create programs where these workers can save their own imaginary money. However, they would never require businesses to fund any portion of their workers’ retirement or agree to enhance Social Security benefits. In fact, this conservative led Congress wants the exact opposite of what Crowley outlines in his compassionate but somewhat cruel report.
Crowley is just reminding low-wage workers of all the things they can’t have.
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Denise Perkins
