Editorials

Good step on retirement accounts

A new retirement option is coming for employees of small businesses in Washington. Gov. Jay Inslee signed a bill into law this week that lets the state start setting up the Small Business Retirement Marketplace, which might open for business in 2017, backers say.

Washington becomes the second state after Illinois with such a program, which is to be created by the Department of Commerce through contracting out with a private financial group that would operate the online portal.

The concept was championed by AARP of Washington as part of a national Work and Save Campaign. It has been a big priority of those worried about a coming tsunami of baby boomer retirees — and later generations — who are ill-equipped financially for life after they stop working.

Senate Bill 5826, sponsored by Democratic Sen. Mark Mullet of Issaquah and Democratic Rep. Larry Springer of Kirkland, lets small business employers of fewer than 100 workers set up payroll deductions and funnel a portion of their workers’ pretax income into IRA-style investment accounts. Advocates such as Springer say small businesses can find this is too big of a chore.

Financial firms would be barred from charging an administrative fee for participating businesses. Employers could contribute up to 3 percent of a worker’s wage to the accounts.

Taxpayer costs are about $523,853 this biennium and a bit less in the future, and Commerce is given authority to accept and use private foundation grants for marketplace expenses in the future.

The proposal died during the 2014 session after financial services firms objected. It survived this year after the program was shifted to Commerce from Retirement Systems and investments would be handled by the private sector instead of the State Investment Board.

AARP and the left-of-center Economic Opportunity Institute in Seattle describe the program concept as an “easy to use retirement tool” for employers that will benefit workers, and they note 1.5 million Washington workers currently lack access to retirement plans through their employers.

Under SB 5826, employees would be enrolled in conservatively managed IRA-style accounts, minimizing risk for those who have little investment experience.

AARP state director Doug Shadel said in a news release that 462,000 people ages 45 to 64 in Washington have less than $25,000 in retirement savings, which means they must rely on Social Security almost entirely.

“Social Security is a critical piece of the puzzle but never meant to be the sole source of retirement income for retirees,” Shadel said. “Yet 43 percent of today’s retirees rely on Social Security for 50 percent or more of their retirement income. The average benefit of $1,300 per month is simply not enough income to ensure people can live independently as they age.’’

Indeed.

We hope lawmakers put money in the budget for this marketplace program, so it is not delayed past 2017. We also hope business owners give the program a fair try when it eventually comes on line.

More work obviously needs to be done at the national level to ensure Americans are prepared for their so-called golden years. This program is a small but important step at the state level that may complement those efforts.

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