Igniting the Spark for Retirement Security

When it comes to building a financially secure retirement,
Americans are facing a crisis.

A 2013 study by the National Institute on Retirement Security found
that working Americans between the ages of 25 and 64 have between $6.8 and $14
trillion less than they would need to retire at age 67 without incurring a
significant lifestyle change.

With households facing such stark shortfalls, it is
unsurprising that adequate retirement is one of our biggest national economic
concerns. According to Gallup, 59 percent are anxious about having enough money
for retirement

This means that as a nation, we have three choices: abandon
all hope of future generations retiring in our 60s, expect to absorb a drastic
financial upheaval upon retirement, or dramatically improve our retirement
security mechanisms.

Many jobs are physically or emotionally demanding enough to
make working well past the age of 70 simply unreasonable. “Drastic lifestyle
change” can, for many, literally mean being forced to choose between medication
and food. This crisis is a genuinely terrifying situation, and one that
clearly calls for us to explore options behind door number three.

How can we effectively improve our retirement security
mechanisms? One way is to address the lack of access to workplace plans. Barely half of private sector workers have access to an
employer-based retirement plan, and the data are very clear that workers
without access to a plan at work are enormously unlikely to save for
retirement.

In Illinois, we recently passed the Secure Choice Retirement
Savings Program. Under the new law, workers whose employers don’t offer any
plan (and have at least 25 employees and have existed for at least two years)
will be automatically enrolled with a 3% payroll deduction in a Roth Individual
Retirement Account (IRA). They can opt out if they don’t want to participate,
or change their contribution rate if they like. The funds will be pooled together
and a private firm will manage the assets with oversight from a board chaired
by the state treasurer (and also includes the state comptroller and four
gubernatorial appointees who must also be approved by the state Senate).

This program accomplishes three critical goals. First, it
creates a workplace-based savings program for many workers who currently lack
access. Second, it enrolls employees by default, which means that participation
rates and consumer satisfaction will be higher. Finally, it creates a large
pool of savers, with a competitive bid process to ensure that fees will be kept
low.

All this plan asks of employers is to give employees the
opportunity to opt out and to conduct the payroll deduction. In other words, it
costs businesses—not to mention government—nothing.

That’s why this concept has received plaudits from
economists and policy wonks from across the ideological spectrum. Illinois’
plan is modeled on a proposal that was supported in the 2008 presidential
campaign by both our then-Senator Barack Obama and Senator John McCain.

Given the depth of the problem, the high level of public
concern, and the broad support for the Secure Choice concept, one might assume
that passing this law was easy. But it wasn’t—and states across the country
looking to follow Illinois’ lead are facing battles of their own.

In Illinois, we fought this battle for years before finally
succeeding by the skin of our teeth. Other states have tried, and while many
(including California, Oregon, Massachusetts, West Virginia, and others) have
made significant progress, none has yet passed a law that actually creates a
Secure Choice program. And notwithstanding President Obama’s continued support
for retirement savings initiatives, through legislative proposals and the
executive action creating the myRA initiative,
Congress doesn’t seem any closer to passing major legislation on the problem of
access to workplace savings plans than they did six years ago.

Why all this resistance to a bipartisan effort to help
Americans save for retirement? 

Advocates and public officials (myself included)
still have work to do to make stronger connections for the public between our
legislative efforts and citizens’ concerns about retirement. We also need to
continue to build a more politically powerful and diverse coalition of partners
in this process, because we face some strong opposition. Many in the financial
sector view the creation of a new savings program (even one whose assets are
privately managed) as competition, while some employer groups object to being
responsible for deducting an IRA contribution from an employee’s paycheck and
forwarding it to the fund manager.

In spite of these difficulties, the path Illinois took offers
a few instructive lessons for success in other states. Persistence in making
Secure Choice a priority is one. During the summer and fall of an
election year, when most people who participate in the political process were
focused on campaigns, other advocates and I drove across the state multiple
times, meeting with any legislator who would see us. We were also willing to
listen to the opinions and concerns of anyone who was willing to speak with us,
and, in many cases, to amend the bill so as to address those concerns. The bill
was amended 17 times before it passed, and each of those amendments responded
to a point that someone raised in these conversations.

Many of those discussions also brought on board a new
legislator or interest group. We were also able to grow our coalition
strategically by persuading some previously neutral or nominally supportive
entities to be more engaged and start devoting time to meeting with
legislators. Simultaneously, we were able to convince some opponents to take a neutral
position.

Finally, we benefited from a tremendous amount of that most
important of qualities: luck. The Senate had to vote on the legislation twice,
and in each instance we had no votes to spare. While we were still working to
pass Secure Choice, a statewide advisory referendum recommending an increase in
the minimum wage passed overwhelmingly in November 2014. Because of a complex
interplay between discussions happening at the state level and in the City of
Chicago, it became clear that we’d be unable to pass a state-level minimum wage
increase, but support for the measure gave us a clear mandate to pursue other
pathways to economic opportunity for low-wage workers—like Secure Choice.

This context gave Secure Choice significant momentum and
helped facilitate its passage in the month following the election. This was
wonderful news for the millions of Illinois workers who currently lack access
to workplace-based retirement plans—certainly cause for celebration. At the
same time, we can’t lose sight of the role of good fortune in this outcome or
ignore the concessions required to build consensus (remember the 17
amendments?).

In order to parlay this very meaningful Illinois success
into national action that can truly repair our country’s broken retirement security
system, we’re going to need to establish a game plan that relies less on luck.
In fact, we’re going to need to establish a game plan that makes success
inevitable.

I think the ingredient we’re missing right now is a strong
political discourse that connects policy interventions to the deep anxiety
Americans feel about retirement. When the majority of citizens have a deep and
abiding concern about an economic issue, that issue is like tinder waiting to
be ignited. And once ignited, it will necessarily be a part of a national
agenda, and hopefully on the path to national resolution.

For instance, health care has been on the agenda of national
political leaders for the better part of a century, and during much of that
time opinion surveys have demonstrated that Americans strongly supported
reform. However, it wasn’t until the 1991 U.S. Senate election of Harris
Wofford that elected
leaders, media elites, and the public were all speaking about the issue in the
same language with the same sense of urgency. This sudden — indeed,
abrupt — transformation had a huge impact on the political and policy dialogue
for years to come.

All the ingredients are in place for retirement security to
undergo the same rapid transformation — and once it does so, there is no limit to
the amount of good we can do for our fellow citizens. Access to a dignified
retirement is a core component of a middle-class life, and right now we’re
falling between $6.8 trillion and $14 trillion short. It’s time to create the
conditions to solve this problem once and for all.

About the author: Daniel Biss represents the 9th district in the Illinois State Senate. He was the lead sponsor of the Secure Choice Retirement Savings Program.