As if to demonstrate that the U.S. House of Representatives isn't the only chamber willing to shortchange the nation's benefits package, the U.S. Senate this week approved a resolution abolishing a U.S. Department of Labor regulation that paved the way for state-sponsored retirement savings plans like the one Maryland authorized last year. The 2016 Obama administration rule removed a crucial impediment within the Employee Retirement Income Security Act or ERISA that formerly prevented state and local governments from creating retirement plans on behalf of small businesses that don't currently offer a 401(k) or similar benefit to their workers.
Even by Washington standards, the level of hypocrisy exhibited in Wednesday's 50-49 Senate vote is staggering. Members of Congress receive generous taxpayer-financed, government-managed health care and retirement benefits. In a single week, they are taking major steps to limit those same options for millions of Americans working in the private sector with the Senate's anti-retirement vote and Thursday's approval of the House's latest version of Affordable Care Act repeal-and-replace legislation.
And while the controversial GOP health care bill may yet be upended, killing state-sponsored retirement plans appears to be moving along under the radar with barely a murmur given that the House has already approved the resolution. It now lacks only President Donald Trump's signature to become law, and he has expressed no reservations about the measure.
How anyone could object to Maryland's voluntary retirement plan, the Maryland Small Business Retirements Savings Program and Trust, is beyond rational explanation given that it's entirely voluntary. Expected to be fully up and running by next year, the program doesn't force employers to contribute any money themselves, only to withhold a certain percentage of employee salary (and the workers can opt out entirely if they like). The program even offers an incentive to companies that choose to join — a $300 waiver from their annual business registration fee.
The only complaint to be heard from Republican opponents on the Hill is that they don't like the idea of greater government involvement in retirement savings. But that's sheer hypocrisy, too, given that the latest anti-Obamacare bill was all about giving states the authority to decide health benefits. What happened to that state's rights argument for retirement benefits? Apparently, the GOP's only consistency in balancing federal versus state decision-making is its desire to poke holes in the social safety net for working families.
Even worse, opponents ignore a full-blown crisis in retirement savings. Over the last several decades, as the private sector moved away from defined benefit retirement plans or pensions, the expectation has been that defined contribution retirement savings plans like the 401(k) or 403(b) (for non-profits) or 457(b) (for government workers) would make up the difference. It hasn't worked out that way. Too many Americans have too little money socked away for retirement, and the bill is coming due.
Nearly half of all Americans between the ages of 18 and 30 have nothing, zero, zilch put away for retirement. One in three Americans of all ages are in the same predicament. More than half of all Americans have less than $10,000. The nation's total shortfall in retirement savings is estimated at a staggering $6.8 trillion to $14 trillion, according to the National Institute on Retirement Security. Experts say a crucial means of fixing the problem is to create compulsory retirement savings accounts (with that opt-out clause). But what about small businesses that can't afford even the paperwork involved? That's what makes state-sponsored plans so attractive — even Maryland's Republican governor who initially expressed reservations about the approach was convinced to sign on.
State-sponsored plans aren't the only remedy, but at least they offer a glimmer of hope. If Congress is serious about facing the retirement savings crisis, they'd be better off pursuing similarly productive avenues like shoring up Social Security's long-term financial health or passing reforms to nurture low-cost, high quality retirement savings plans that could be available to everyone. And who is hit hardest by Washington's benefits-killing approach to health care and retirement? It's low-income workers, a growing number of whom are facing retirement age with zero retirement savings. A generation ago, they might have been covered by a pension plan, now they are lucky if they are covered by Social Security. The average monthly retirement benefit for Social Security recipients? Just $1,360 per month, which is roughly the federal poverty level for a household of two. That's not a safety net, that's about half of one.