A coalition of large retirement industry players, including the AARP, American Federation of State, County & Municipal Employees, Service Employees International Union and Pension Rights Center, have banded together to find new ways to build retirement security for even the lowest-income workers.
The Retirement Security for All campaign works to protect existing municipal, state and private plans, but is focused on expanding coverage for uncovered workers.
The campaign was founded on the back of Retirement USA, a coalition that was founded in 2009 to foster a national discussion on the need to develop a secure and adequate retirement system to supplement Social Security.
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The coalition is working closely with states that are moving in that direction, like California, which enacted the California Secure Choice Retirement Savings Trust Act, which has the potential to cover about 7 million private-sector workers in the state, said Karen Friedman, executive vice president and policy director of the Pension Rights Center, speaking before the annual meeting of the Texas Municipal Retirement System this week.
The California Act lays the groundwork for a state-administered retirement savings plan that is based on an automatic IRA but has key features that meet the coalition's 12 principles for a new retirement system in the U.S.
After studying systems in other countries and proposals and programs in the United States, Retirement USA incorporated the best features of defined benefit pension plans, 401(k) savings plans and other features.
The group believes any new retirement system must include universal coverage, meaning that all workers should be able to participate in it unless they already are in plans that provide equally secure and adequate benefits, she said.
The second piece is security. Workers should be able to count on a steady lifetime stream of retirement income to supplement Social Security. The third feature is adequacy. The average worker should have sufficient income, along with Social Security, to maintain a reasonable standard of living in retirement.
Other features include:
- Shared responsibility between employers, employees and the government;
- Required contributions should be made by both employees and employers, with the government subsidizing the contributions of lower-income workers;
- Contributions to the system should be pooled and professionally managed to minimize costs and financial risks;
- People should not be allowed to take withdrawals or loans from their accounts except in the case of permanent disability;
- Benefits should be paid out over the lifetime of retirees and any surviving spouses, domestic partners and former spouses;
- Benefits should be portable when workers change jobs;
- Additional voluntary contributions should be permitted;
- The system should be administered by a governmental agency or by private, nonprofit institutions that are efficient, transparent and governed by boards of trustees that include employer, employee and retiree representatives;
- Oversight of the system should be by a single government regulator dedicated to promoting retirement security.
"These are not unreachable ideals, and we have looked to many plans and proposals, both here and abroad, in developing our principles and ideas for a new system," Friedman said.
Massachusetts also has passed a state-administered plan for employees of nonprofit organizations and Connecticut, Minnesota, Rhode Island, New York, Oregon and other states have expressed interest in exploring these approaches, Friedman said.
The organization believes that the states will lead the way to a comprehensive national solution.
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