State Treasurer Backs Retirement Program for Private, Small Businesses
The Senate Pensions Committee took up House Bill 4375 creating the West Virginia Voluntary Employee Retirement Accounts Program.
The program would be available to businesses with up to 100 employees who do not have a current retirement system.
Employers or employees could voluntarily opt into the program, automatically deducting a retirement contribution from their paycheck each month, but employers would not be required to contribute to those plans.
The bill states an employer who currently has a retirement plan cannot drop it and opt into the state plan which will be run by the state Treasurer’s Office.
“The concept of the program is right now you have a lot of mom and pop shops that have a horrible time retaining and attracting employees and holding on to them,” said Diana Stout, general counsel for the Treasurer’s Office.
“The programs that are offered for example by insurance companies would become much more attractive to those small companies once they’ve had to acclimate and learn how to do this.”
To start, the bill gives the Treasurer’s Office access to up to $3 million from the unclaimed property account, but that money must be repaid by 2024.
Stout said it will initially cost around $250,000 to hire outside counsel with expertise in the investment area.
She said the office will also look to hire a third party administrator with investment options and two or three in house employees to run the program along with its educational and marketing components.
Ultimately, Stout said, the bill is about saving the state in the long term from a generation of West Virginians who will rely on the government for help after retirement.
“We have more and more people that have no access to retirement plans and I worry that there won’t be Social Security for a lot of people,” she told the committee.
“The state is going to ultimately have to do is take care of these people because Social Security is not going to be sufficient for them to live on as long as people are living today. So, we need to do things to encourage people to save money.”
But industry representatives have problems with the program.
“We need to encourage people to save more money and take more responsibility for their retirement,” said John Pauley, executive director of the National Association of Insurance and Financial Advisors in Charleston, “but to say that you need to go off and start your own plan, that’s a substantial amount of money you’re going to have to come up with to get this thing up and running. It’s a lot bigger than $3 million I can tell you that right now.”
Still, Senate Minority Leader Mike Hall felt the program is unnecessary because the private sector is already able to offer the same types of programs to employers and employees and instead, the state Treasurer should be working with the industry as it has on other projects to raise awareness and educate the public.
Treasurer John Perdue said the industry is not going after the same type of people the state program could help. He said the state will be focused on low-income workers who may only be able to save $5 or $10 at a time.
Perdue said 19 other states are looking to put similar programs in place and California and Massachusetts have already taken legislative steps.
“The field’s being plowed out there in a lot of other states and you know, you don’t have to be last every time,” he said. “It’s nice to be first in something. I think we can be a leader.”
Committee members passed the bill, but amended it to be available to businesses with up to 50 employees.
It now moves to the Senate Finance Committee for their consideration.