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Wisconsin Task Force Recommends State-run Retirement Plan

Government Affairs

If the recommendations of the Wisconsin Retirement Security Task Force are followed, the Dairy State could join others that have implemented a state-run plan to provide coverage for workers whose employers do not offer a retirement plan. 

The task force, headed by Wisconsin State Treasurer Sarah Godlewski, issued its report on Feb. 10. The task force makes a variety of recommendations, including establishing a state-run program dubbed “WisconsinSaves.” Gov. Tony Evers (D) had signed Executive Order 45 on Sept. 16, 2019, creating the task force to address retirement security in the state. 

The Situation

“Wisconsin is in trouble when it comes to retirement security,” says the report, adding that “even before the COVID-19 pandemic, our retirement system was not working for a significant number of Wisconsin workers.” It notes that in 1983, traditional pension plans covered 62% of employees in Wisconsin, but that by 2016, that had shrunk to 17% of them. In addition, the task force says, AARP found that:

  • nearly one million people in that state age 18-64 do not have access to a retirement savings plan through their employers;
  • workers at all earning levels in Wisconsin lack access, but it is especially pronounced among those earning $40,000 or less a year—to the tune of 81%; and 
  • 20% of Wisconsin households with respondents age 55-65 have no retirement savings and a net worth of negative $20,660.

And the FINRA Investor Education Foundation found that 46% of Wisconsinites lack a rainy-day fund to cover a financial emergency. And the pandemic has exacerbated the situation, the report says: “The pandemic has transformed our world, and retirement is no exception. The pandemic magnified and further exposed the fragility of financial security among Wisconsinites. The pandemic’s economic fallout has led to 73% of households reporting a reduction in income with 24% of those households characterizing the reduction as ‘very significant.’”

All that has consequences not only for employees but also for taxpayers, says the report: “Wisconsin is already experiencing significant annual increases in the costs of programs to support retirees with insufficient retirement income, and these costs are projected to grow as the state’s population ages over the next two decades.” Furthermore, it cites a University of Wisconsin study that found that absent action, more than 400,000 senior citizens in Wisconsin will be below the poverty line by 2030, and that the state will need to spend $3.5 billion more on public assistance programs.

Popular Sentiment 

Popular sentiment among Wisconsinites supports doing more to encourage retirement saving, according to the task force. AARP says that 88% of those it surveyed in Wisconsin told them they wish they had saved more for retirement and that 70% of small business owners there supported doing more to encourage people to save for retirement. And the task force sought the opinion of people in the state in towns, small cities, in Milwaukee, and among senior citizens, farmers and the small business community through public hearings and electronic town halls. From these conversations, the task force gleans that Wisconsinites:

  • wish they had started saving earlier and want to make saving for retirement a habit; 
  • who are self-employed or work in the gig economy lacked access to retirement;
  • with small businesses experienced barriers to providing simple, cost-effective savings plans; and 
  • found retirement difficult and time-consuming to navigate, and said they need trustworthy, centralized resources and information.

The task force reports that there is strong support for doing more among small businesses in Wisconsin as well. It cites AARP researchers who found that nearly 80% of small business owners in Wisconsin support a “ready-to-go” retirement savings option, and 60% would be likely to offer such a program to their employees if the state government created it. 

Recommendations

The task force suggests that action be taken in five areas: 

  • Participation. Increase worker access and participation by expanding employer-based options for retirement savings. 
  • Access. Ensure that all workers in Wisconsin have a portable option to save for retirement. 
  • Address the Savings Gap. Protect retirement savings through a more comprehensive approach to financial security that can help workers and families better prepare for short-term financial shocks. 
  • Future Generations. Provide younger generations with tools to save as early as possible so they can accumulate significant savings.
  • Financial Wellness. Provide individuals and businesses with information and resources that will help them to take a more active role in saving and creating a more financially secure retirement. 

More specifically, the task force offers these suggestions: 

  • Create incentives to encourage the adoption of auto-enrollment best practices to boost participation in workplace retirement plans by engaging employers to provide employees with the choice to opt-out as opposed to requiring them to opt in. 
  • Create WisconsinSaves—a state-facilitated, privately-managed auto-IRA program that provides a simple, easy retirement benefit plan for employers that do not offer one. “This is especially dire for small businesses with fewer than 100 employees as retirement plans for small pools of employees are often costly, complicated, and time-consuming,” says the report. “Providing an easy, affordable solution to expand retirement access for small businesses, gig workers and the self-employed will address key barriers and empower Wisconsinites to achieve retirement security.” 
  • Develop an emergency savings tool to ensure that employees have a rainy-day fund, protecting retirement savings so they are investing for the long-term. 
  • Launch a “401(K)ids” program that would create an investment account for every child born in Wisconsin, setting them up with a wealth-building tool for future financial security. 
  • Construct an e-commerce web platform that would serve as a centralized place in which individuals can easily identify options available to save for retirement and other purposes, while also learning more about creating good financial habits and strengthening overall financial well-being. 

“These recommendations will move the state towards a more secure future that is good for Wisconsinites, our local communities and the long-term fiscal sustainability of the state,” says the task force. “With these recommendations, we offer a range of tools and policies that should be implemented to help make that a reality for more Wisconsinites,” writes Godlewski.