A new bill introduced by Rhode Island legislators aims to establish a state-sponsored auto-IRA program, addressing the retirement savings gap among private sector workers in the state.
Senate Bill No. 2045 proposes a model for creating a retirement savings program that would provide an option for employees who currently lack access to employer-sponsored plans.
The proposed Rhode Island Retirement Savings Program is designed to mimic the structure of the "Secure Choice" savings programs already implemented or under consideration in 16 states. Most recently in April, Washington Governor Jay Inslee signed Senate Bill 6069, Washington Saves, which will enable auto-IRAs for Washingtonians without access to retirement plans at work.
Under the legislation, private-sector employers with five or more employees in Rhode Island would be required to offer a retirement plan to their employees. This mandate can be satisfied with any type of retirement plan, such as a 401(k).
The bill also includes provisions for a state-facilitated IRA-based retirement program, allowing participating employers to comply without needing to establish and manage their own plans.
According to data from Pew Charitable Trusts, 172,000 workers, or 51.2 percent of Rhode Island’s private sector workforce, do not have access to retirement savings through their jobs.
The research highlights the potential long-term consequences of this issue, projecting a $456 million increase in state spending from 2021 to 2040 if the current retirement savings situation remains unchanged. Additionally, vulnerable older households in the state could face an average income shortfall of $9,090 per year by 2040.
The Pew report further indicates that the ratio of older households to working-age households in Rhode Island will increase by 37 percent from 2021 to 2040, adding to the financial burden on state taxpayers.
The report suggests that if households saved an average of an additional $2,170 annually, or $180 monthly, they could alleviate the taxpayer burden while securing a better standard of living in retirement.
The ARA, the coordinating entity for several affiliate organizations including the National Association of Plan Advisors, voiced its support for the measure on Thursday.
“Senate Bill No. 2045 strikes the proper balance to close the retirement plan coverage gap in the private sector workforce to the greatest extent possible while imposing the minimum possible burden on Rhode Island’s employers,” the ARA said in an open letter addressed to Rhode Island Senate President Dominick Ruggerio.
Underscoring how minorities historically fall behind in retirement readiness, with 52 percent of Black Americans and 68 percent of Hispanic Americans not having a workplace retirement plan in reach, the ARA said expanding retirement plan coverage will help address inequities and gaps in retirement savings.
Data shows that when moderate income workers are automatically enrolled in a workplace retirement plan there is no racial disparity in retirement savings participation with Black, Hispanic, and White Americans all participating at an 80 percent rate,” the association said.
“Closing the retirement plan coverage gap helps achieve equality and fairness in retirement savings opportunities,” it said.
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