Editorial: Expanding state law on offering retirement plans at small companies benefits us all
Since the state began signing up companies to the Illinois Secure Choice retirement savings program in the summer of 2018, more than 6,000 companies have joined and almost 3,000 more are in the process of doing so.
State Treasurer Michael Frerichs said this week about 85,000 people are now saving for retirement through this state-sanctioned program and have a combined $55 million saved in individual Roth IRAs -- administered by a financial planning company selected by the state.
The program arose out of a law signed by Gov. Pat Quinn in 2015 that requires companies with at least 25 employees that don't provide a pension or Individual Retirement Account option to either participate in Secure Choice or come up with their own plan.
At companies affiliated with Secure Choice, 5 percent of each employee's pay -- after taxes -- is invested in a Roth IRA with their name on it. That happens automatically. Of course, each employee has an opportunity to opt out -- and to date between 25 and 30% have, Frerichs said.
This is different from a state pension, where money is pooled together. And it's portable, too, which Frerichs said is a boon for the hospitality industry, in which workers tend to move more often between companies.
Now, Frerichs wants to amend the law to include companies with as few as five employees. His goal had been to include even sole proprietorships, but he was getting pushback from business organizations concerned about the impact of more bureaucracy on such small companies. The compromise has moved most formerly opposed business organizations -- including the state Chamber of Commerce, the Illinois Retail Merchants Association, the Illinois Associated Builders and Contractors and others -- to a neutral position on the bill, though some resistance remains.
We were in favor of the law three years ago when the first companies signed on. We all know that, especially with young people who see retirement as an unthinkably distant possibility, there are always more excuses than reasons to begin saving for a rainy day. But those of us who are natural savers know that once that money goes into savings automatically, you almost forget about it.
"We have a retirement crisis in this country," Frerichs said.
The most recent Northwestern Mutual Life Insurance Co. study on retirement preparedness said Social Security accounts for just 27% of the average American's retirement income, so don't plan on relying just on it to get by.
Why should you care whether this legislation passes if you work for a company with its own savings plan? Because the more people who prepare themselves for retirement, the less reliant they'll be on publicly funded safety nets later. And because the longer people stall retirement to save enough, the fewer jobs there will be for your kids and grandkids entering the workforce.