The Michigan Senate Labor Committee heard testimony Thursday on bills to create a public IRA option for workers whose employers don’t offer retirement plans.
Under the package, the state would auto-enroll eligible employees in a Roth IRA, and then either choose to invest or leave the program. A third-party group would run the retirement accounts with input from an oversight board.
One of the bills’ co-sponsors, State Senator Mary Cavanagh (D-Redford), said having a retirement plan is “critical” for people’s financial security.
“For many small businesses and their employees, their barriers to establishing or participating in traditional retirement programs remain too high,” she said during Thursday’s hearing. “This means a life of contributing to Michigan’s economy without a secure retirement,” Cavanagh said.
Opponents of the bill took issue with the auto-enrollment aspect of the bill. State Senator Thomas Albert (R-Lowell) said he’s concerned some people might not be financially ready to start saving for retirement.
“Perhaps they have high credit card interest loans they have to pay back. Perhaps they have no savings whatsoever to deal with a flat tire, or some type of car maintenance, or a broken window, or a medical bill, something that comes up,” Albert said.
But supporters argued people could adjust their investment levels for their needs and that saving now would help them in the long run.
Another source of opposition stemmed from the mechanics of how it would work. Employers would be responsible for forwarding any money employees set aside for the retirement plans to the state.
Tim Langholz with the National Federation of Independent Business told the committee that could be a hassle for businesses.
“Saving for retirement should be a matter of personal responsibility, not another regulation put on small businesses,” he said.
But Senate Labor Committee chair John Cherry (D-Flint) said it’s relatively simple for businesses.
“You have to submit the payroll, which you already have to do for the state, and then you have to list your employees, which because you are deducting your income tax, the state already receives that information as well,” Cherry told reporters after the hearing.
Over twenty states have an auto IRA program according to Pew Charitable Trusts, which has been advocating for similar policies around the country.
