LANSING — State Representatives Scott Dianda (D-Calumet) and Robert Wittenberg (D-Oak Park) introduced legislation today to create the Michigan Secure Retirement Savings Program for private-sector workers whose employer does not offer a retirement savings plan.
“Small employers frequently do not offer retirement savings plans to their workers, and yet everyone should be saving money for retirement,” said Dianda. “We’re introducing this plan to create a savings program for the many private sector employees in Michigan who don’t have the benefit of a retirement plan through their workplace.”
“Young people often do not think about retirement, however it is important to develop a habit of saving,” said Wittenberg. “The sooner we start, the better we will be later in life. I believe that three percent of a paycheck is not an amount that would break someone’s bank, but over the period of 20 years it can guarantee we all can retire with security and dignity.”
The Michigan Secure Retirement Savings Program, House Bills 5776 (Dianda) and 5777 (Wittenberg), would automatically enroll employees of eligible Michigan employers unless the employee chooses to opt out of the savings program. The plan requires established employers (those businesses that have been in existence for two years) with 25 or more employees who do not offer a retirement plan or a payroll deduction IRA to have a payroll deposit arrangement allowing their employees to participate in the Michigan Secure Retirement Savings Program. Enrolled employees would automatically contribute 3 percent of their paychecks, or they may elect to deduct another amount, or they can opt out of the program.
Rep. Wittenberg’s bill offers a tax credit so that the plan will be affordable for lower-income workers. The credit is based on the federal Retirement Savings Contributions Credit. The federal credit was enacted as a temporary provision in 2002, then became a permanent part of the tax code in 2006. A Michigan taxpayer can receive back from the state 50 percent of their federal credit or up to $500, whichever is less.
“When you don’t have much money, it can be difficult to save for the future,” said Wittenberg. “The state tax credit will help to supplement other tax benefits available to people who set aside money for their retirement. I believe allowing people to save while also letting them take a credit against that savings should make participating in the program easier.”
The plan also provides important employer safeguards. Employers will not have any liability for an employee’s decision to participate or opt out of the program or for the employee’s investment decisions. The state of Michigan also will have no liability for the payment of benefits. The program will be governed by an oversight board chaired by the state treasurer. Other members will be the director of the Department of Technology, Management and Budget, a small-business representative appointed by the governor, an employee representative appointed by the governor and two individuals with retirement savings and investment expertise appointed by the governor.
“According to AARP, about 48 percent of Michigan private-sector employees, more than 1.6 million workers, do not have a retirement plan through their job,” said Dianda. “For women who are the breadwinners in their families, and who unfortunately still don’t make equal pay for equal work, this can be a disaster when they do leave the workforce and rely on Social Security, which will be less than most men will get from Social Security because of the pay equity gap. Creating a retirement savings program for our workers who don’t have one now will not only help them in their retirement, but will also help our local and state economies when these individuals have the money they need to spend and take care of themselves and their families.”