Commentary

Lisa Hagerty: Consider public retirement plan options

Editor’s note: This commentary is by Lisa Hagerty, who is the owner of Well Heeled and The Yoga Barn in Stowe and a National Leadership Committee member for the Main Street Alliance

As a small business owner in Stowe, I work to do my best to pay my employees fairly and provide an environment that supports them in their life both in and outside of work. Most Main Street business owners know that investing in their employees is the key to a successful business and to accomplish this, many of us manage supports beyond fair wages in nontraditional ways. One place where there is no room to maneuver, however, is in the provision of retirement plans. Small business owners wear many hats, but being investment advisers should not be one of them.

Here are some stats: About 45 percent of working Vermonters do not have access to an employer-sponsored retirement plan.[1] And nationally, half of all employees have no retirement assets — no pension, no 401(k), no IRA. The problem is particularly acute for people who work for small businesses, including the business owners themselves. Among the small, “main street” business owners that were surveyed during 2016, as part Main Street Alliance of Vermont’s statewide survey project, only 9.5 percent reported providing a retirement plan to their employees.[2]

Vermont is a predominantly small business state, and the inability of these businesses to afford robust benefits packages puts them at a disadvantage in attracting and retaining a skilled workforce. The lack of benefits also limits the ability of the workforce to choose our state and our small businesses as employers. An important factor in making a state “business friendly” is to increase its attractiveness for potential employees to afford to live there. Vermont has so much going for it in terms of livability – but we need to make our small business economy accessible to more people — allowing the opportunity to work closer to home and children, to relocate to for improved lifestyle, or to be able to work in the familial environment of one of our many small main street businesses. The lack of robust benefit packages puts these options out of reach for most people to either work for, or start, a small business.

More than 25 states, including Vermont, have taken steps to begin creating pooled, state-managed retirement savings plans for small business owners and our employees. Seven states are already implementing them. These state-administered retirement initiatives have proven to be an innovative solution to the retirement savings crisis. This is a win/win for a state with an economy so heavily reliant on small businesses.

Vermont’s Public Retirement Study Committee, led by Treasurer Beth Pearce, has spent years investigating the right public retirement option for Vermont. In its third report, issued in January, the committee recommended moving forward with a Multi-Employer Plan (MEP) to which both employees and small business owners could contribute. Now, legislation is moving in both the House and Senate that would set up the MEP and give every Vermonter access to a secure retirement option.

GOP leaders want to revoke rules put in place by the Department of Labor last year that allow states to establish retirement savings arrangements for small business owners and employees not covered under workplace savings policies.

 

Programs like this that put small business owners in the best position care for themselves throughout their lives, while helping employees do the same, are a no-brainer. So why are Republicans in Congress poised to dismantle them? It’s hard for me to imagine; but here’s what’s going on.

Through introducing H.J. Res. 66 and H.J. Res. 67, GOP leaders want to revoke rules put in place by the Department of Labor last year that allow states to establish retirement savings arrangements for small business owners and employees not covered under workplace savings policies. Although the plan set out by Vermont’s treasurer and state Legislature would not yet be affected by the pending actions at the federal level, it is likely only a matter of time until our state’s proposal comes under fire.

With such pressing issues as access to health coverage for millions of their constituents at risk, it’s hard to fathom why Republican lawmakers in Washington have set their sights on dismantling new rules that garnered bipartisan support and put small business owners, their employees and customers in the best position to succeed.

I feel lucky to live in Vermont and to be a small business owner. Actually nothing is more rewarding. It’s comforting to trust that Sens. Bernie Sanders and Patrick Leahy will continue fighting for working class people, including small business owners – but we must all persist in mobilizing to keep their colleagues honest in pursuing what’s good for the country over what’s good for their party politicking. Equally as importantly, I encourage Vermont’s state legislators to continue moving forward with smart state level policies, like the MEP Public Retirement Option, that support workers and small business. It’s the right thing to do.

 

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  • walter carpenter

    “About 45 percent of working Vermonters do not have access to an employer-sponsored retirement plan.[1] And nationally, half of all employees have no retirement assets — no pension, no 401(k), no IRA.”

    I am one of them and it is really scary.

    • Cheryl Ganley

      Your employer does not have to be the one to set up a retirement plan. You can set one up yourself.

    • Matt Young

      Walter, those who are self employed are not responsible for your retirement or benefits.

      • walter carpenter

        “Walter, those who are self employed are not responsible for your retirement or benefits.”

        Well, I am not exactly sure that I asked the self-employed to be responsible for my retirement (though I do also pay in to the social security pool to help the self-employed in their retirement) as this is a voluntary program.

        • Cheryl Ganley

          If you are self employed you pay a higher amount (12.4% vs. 6.2%) into social security as they do not have an employer to make up the other half.. If you forgo those payments then you do not get to receive social security. So you paying into the social security pool does not help a self employed person anymore then they help themselves.

    • Matt Young

      Must be President Trumps fault or are you going to blame George W for the fact you have no retirement assets?

  • Joel Davidson

    Lisa, I wholeheartedly agree with your position and the work Treasurer Beth Pearce has done on this issue. I believe this program could be enhanced by affiliation with the State employee retirement savings plan that Treasurer Pearce helps administer. The advantage is that the state contracts with investment advisors and managers that provide greatly discounted fees and investment options that are approved by a board that is concerned about the performance and security of those investments and not in any way connected to broker commissions. Having this option for a 401k, Roth or deferred compensation account provides employers a way to support their employees future security with minimal expense and overhead on their part. Utilizing existing State programs by simply expanding the programs to allow both small businesses and individuals such as contractors to access these programs is a great idea.

    Just look at the expansion of the State retirement programs to municipalities that have been very successful for those municipalities that have chosen to participate.

  • Paul Richards

    I thought Social Security was supposed to do all of this. The framework for that is already in place. We already are forced against our will to contribute to SS and the government has squandered OUR money. Why would we and why should we start another government mandated program so we can have our money stolen from us and put into a dark hole in the ground?

    • Joel Davidson

      This is not a mandated program. It would simply give employees options of investing their own money toward their future. These are the same options offered by large businesses and public jobs. Small businesses just don’t often have the time, knowledge or willingness to set up these options for their employees. Allowing employees access to existing, well managed programs would solve these needs.

      • walter carpenter

        “This is not a mandated program. It would simply give employees options of investing their own money toward their future.”

        Exactly and it would also not be dependent on employment, which is a huge problem now. Nor would it charge fees and so on — another obstacle.

    • walter carpenter

      “I thought Social Security was supposed to do all of this. The framework for that is already in place.”

      Social Security is not enough and who knows if it will be around for much longer because the Trumpsters want to destroy it.

  • Scott Mackey

    Have you considered offering a SIMPLE IRA? They are cheap to set up and administer and if you choose Vanguard or one of the low-cost fund providers, the fees are actually very, very low. These plans allow you (the employer) to match employee contributions up to 3% of salary. It is a good option for small businesses that don’t want to incur the fees and other costs associated with keeping and maintaining a 401K plan.

    • Paul Richards

      Scott, this is a good way to go. This way you don’t have to worry about a governmental agency taking your hard earned money and giving it to someone else like the social security theft going on by our government right now.
      These are exactly the type of plans all of the public sector union employees should have. If we had the option to keep the money we are now forced to provide for their plans we could afford to start a Simple IRA for OUR own benefit rather than theirs.