Two years ago, Connecticut made history as the first state in the nation to pass paid sick leave legislation. This week the state legislature turns its attention to an even more pressing public policy challenge: the crumbling state of retirement security for working families in the state.
On March 11, the state Senate’s Labor Committee is holding public hearings on a bill (SB 249) that would create a public retirement plan. According to the Schwartz Center for Economic Policy Analysis, more than half of Connecticut workers have no retirement plan at all through their jobs. That translates to about 740,000 individuals statewide.
With no pensions and only meager Social Security benefits, workers face years of penury and are forced to work well into their golden years in order to survive. And Connecticut is an aging state. According to the Census Bureau, ours is the seventh oldest state in the nation and by 2025, it is expected to grow even older.
Modeled after a “Secure Choice” bill passed in California in 2013, SB 249 would develop a retirement security trust fund where workers could earmark a percentage of their salaries. Administered by the state treasurer’s office, the fund would offer a low-cost, high-rate-of-return retirement savings option for workers not covered by any employer-sponsored plan.
Employees could participate in — or opt out of — the fund through an automatic enrollment process. It would not require state or employer funding, and all administrative costs would be borne by plan participants. The fund would pool participants’ assets (i.e., reducing administrative costs and risk through economies of scale), cap costs, be portable from job to job, and provide a default annuity option for participants once they retire.
The battle lines of this legislative battle are clearly drawn. Supporters of the “Retirement for All” bill, which include the AARP, labor unions and Democratic allies, face stiff opposition from Wall Street and insurance lobbies.
Opponents say the bill is unnecessary, as workers can already invest in individual retirement accounts on their own without the interference of the state. But as state Senate Majority Leader Martin Looney said, “That’s an argument made by people secure in their own retirement. The problem is, we have large numbers of workers, particularly at small employers, who do not have pension plans and are relying on Social Security.”
Critics also argue that given how states have mismanaged their own pension funds, it would be foolish to have government mandate the savings of private-sector employees. Supporters, however, debunk this notion of pension mismanagement and point to a study by Good Jobs First, a nonpartisan D.C. public policy firm, which shows that in 10 states with severe pension issues, “the total annual cost of corporate subsidies, tax breaks and loopholes exceeds the total current annual pension costs.”
The battle over retirement security legislation echoes the fight waged by paid sick leave supporters in 2011. Employers warned that the law, once enacted, would stifle hiring, impose unbearable costs and lead to rampant abuse. But two years later, the naysayers’ concerns may well prove unfounded.
According to a recently released survey of employers by the Center for Economic and Policy Research, more than three-quarters of businesses support the paid sick leave law, with nearly 40% saying they are very supportive. Since its passage, many employers said they experienced concrete benefits from the law. Nearly 30% saw morale improve and close to 15% saw productivity improve. Others reported increased motivation and loyalty. Almost 15% also said sick leave reduced the spread of illness.
Two years ago, state legislators proved critics wrong when they enacted paid sick leave legislation. By all accounts, it has proven to be a boon for employers and employees. Passage of a public retirement plan that begins to address the state’s retirement crisis would reinforce its well-deserved reputation for progressive governance.
Bill Gaston is a vice chairman of the Greenwich Democratic Town Committee, but the opinions expressed here are his own.