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McFall Proposes Private Sector Retirement Program

February 28, 2024

Rep. Mike McFall (D-Hazel Park) has proposed an automatically deducted retirement savings program for private-sector employees, which he said will allow employees to save for retirement even if their employer doesn’t offer a program.

His bill, HB 5461, was introduced this week and referred to the House Labor Committee.

McFall said he introduced the legislation to address the nearly 42 percent of Michigan’s private-sector workforce between 18 and 64 without access to a retirement savings plan at work. He referenced 2020 numbers from AARP Michigan.

“We continue to see an aging workforce that is not financially secure enough to retire,” McFall said.

His HB 5461 would address that by establishing the “Michigan secure retirement savings program” within the Department of Treasury, and an accompanying trust outside the state treasury.

Funds within the trust would be collected from employees via an automatic enrollment payroll deduction IRA, or automatic enrollment into a system where a portion of their wages are set aside each pay period.

Under McFall’s bill, employees could choose between different contribution levels, which have yet to be set, or opt out altogether.

Funds collected would not be commingled with state money, but could be invested. The dollars could also be rolled over by employees into other retirement accounts.

In addition, the bill also creates a separate retirement administrative fund to cover the costs of a newly-formed retirement board’s administrative expenses.

The administrative fund could receive grants and other state or federal funding, and the board would be made up of seven non-compensated members, including the state treasurer serving as chair and two public representatives with retirement expertise as appointed by the governor.

McFall said the program is designed to support both employees and small businesses, as retirement benefits play a major role in making employers attractive, but can be cost-prohibitive for small businesses.

“The program comes at no cost to employers and will help our state continue as an economic driver in the nation,” he said.

He added that the program will also allow more Michiganders to have additional financial autonomy in retirement and save tax dollars, “because fewer people will need to take advantage of social safety net programs as they age.”

McFall referenced numbers from the Pew Charitable Trusts that Michigan’s cost from insufficient retirement savings, chiefly Medicaid costs, will total $11.2 billion from 2020 through 2040.

Fifteen other states have already created some sort of automated savings programs, also known as “secure choice” or “work and save” programs, according to Pew.

Michigan’s proposed legislation received support from AARP Michigan, and State Director Paula Cunningham said an AARP survey found that 79 percent of business owners agreed that “being able to offer a portable retirement savings program helps them attract and retain quality employees and stay competitive.

“Yet nearly six in 10 do not offer their workers a way to save for retirement,” she said. “If we can make it easy for more workers to save through payroll deduction, workers will build savings, small businesses will benefit and taxpayers will save money.”


Article courtesy MIRS News for SBAM’s Lansing Watchdog newsletter

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