State program can help assure secure retirement for thousands
Most Americans believe true retirement is not an option. A recent survey by Employee Benefit Research Institute found 79 percent of workers expect to keep working even after they technically retire, mainly because they anticipate they will need more income. The same survey found only about one-third actually work in retirement, showing how critical it is to save while you can still earn. Unfortunately, this is easier said than done in Illinois since most of the state's entrepreneurs and employees aren't able to access retirement benefits.
Research by AARP found nearly half of Illinois' private-sector workers between the ages of 18 and 64 work for employers that do not offer a retirement plan. When it comes to small business employees, which make up 46 percent of the state's workforce, the problem is even more pronounced: 67 percent of workers at firms with fewer than 100 employees do not have access to retirement benefits.
To address this problem, Illinois adopted a program called Secure Choice, which is a public-private partnership that will allow private-sector employees at firms with fewer than 25 workers as well as the self-employed to contribute to an individual retirement savings account through modest payroll deductions. Once enrolled, workers will contribute a portion of their income into an investment fund managed by a private company and overseen by the Illinois Secure Choice Savings Board.
This program, which is in the pilot stage, would help small business owners provide retirement savings plans at no added cost to their business, thereby helping them compete with larger corporations that can afford the kind of robust employee benefits that go a long way toward retaining talented employees. What's more, this would encourage solo entrepreneurs to start their own firms because they would not be tied to a larger employer by a retirement plan.
While many state legislatures are examining this type of program, Illinois is just the second state to implement one, and as with any major change or new idea, there are skeptics. The U.S. Chamber of Commerce has called Secure Choice "the wrong answer" because its leadership believes state-sponsored plans "are a poor substitute for employer-provided plans" in part because employees "are significantly limited in how much they are allowed to contribute."
This criticism completely misses the point. Whether or not Secure Choice would be better than an employer's retirement plan is irrelevant to the thousands of small businesses, solo entrepreneurs and employees in Illinois who don't have access to any retirement plan. Secure Choice cannot discourage employers to end a benefit they do not offer, nor will it dissuade companies from offering a benefit they cannot afford.
What these critics also seem to ignore is that Illinois small businesses support programs like Secure Choice. In fact, a scientific opinion poll conducted on behalf of Small Business Majority found that most small businesses in Illinois support state legislation establishing a state-administered retirement savings program for the self-employed and small businesses.
Unfortunately, a lack of retirement savings isn't a problem just in Illinois. According to more recent polling, fewer than one in five (19 percent) small employers offer a retirement plan to all of their workers. Small business owners say their biggest barriers to providing this benefit to their employees are that it's too expensive and their business lacks the resources to administer a plan.
Our retirement crisis is severe and Secure Choice alone will not solve it. But it is a clear step in the right direction, addressing an aching need. Illinois should continue to move forward with this plan to level the playing field for the small firms and solo entrepreneurs that cannot afford to access retirement benefits, while also helping more people save for their golden years.
Daniel Biss is a state senator who sponsored Illinois' Secure Choice legislation. Geraldine Sanchez Aglipay is the Chicago-based Midwest Outreach Manager for Small Business Majority.