By Christopher J. Gearon
Frederick business owner Jim Racheff has a front-row seat to a growing savings crisis—one that leaves about 1 million Marylanders without a way to save for retirement at work.
As CEO of DMS Inc., an information systems company, Racheff provides a retirement savings plan to the firm’s 80 employees. Financial brokers regularly woo him to switch his company’s plan. Yet those brokers don’t want to help Racheff provide similar plans to the handful of workers employed by his two other businesses, a small real estate holding company and an organic blueberry farm.
“I was told by one broker you need $10 million in retirement assets before they’d talk with you,” Racheff said. Retirement savings plans “just are not available right now to small businesses.”
As a result, many employees lack a savings plan. “There are so many Marylanders out there who don’t have an opportunity to save at work,” noted Tammy Bresnahan, AARP Maryland associate state director for advocacy.
According to the AARP Public Policy Institute, 48 percent of the state’s private-sector employees work for a business that does not offer a retirement plan. Further, 41 percent of Marylanders near retirement do not have any retirement savings, according to an analysis by the New School for Social Research in New York.
“It’s shocking to me,” Racheff said. In September, he was named by legislative leaders to the Commission on Maryland Retirement Security and Savings, with the goal of building support for providing workers with an easy way to save for retirement. Its recommendations are expected this month.
When the General Assembly convenes Jan. 13, Sen. James C. Rosapepe (D-College Park) and Del. C. William Frick (D-Bethesda) expect to introduce bills to boost retirement savings for Marylanders without current access to a work-based plan.
“This kind of initiative saves taxpayers money—and very significant money,” said Rosapepe. “If you’re old and poor, you draw on a lot of government services.”
The proposal could establish a state board to administer a retirement savings program. A key element would be a payroll deduction for workers at firms with five or more employees that do not offer a retirement plan.
The deduction could go into a portable account or other investment vehicle on behalf of each worker. Individuals could opt out at any time. Businesses would not have to contribute.
The effort is part of a national AARP campaign to help people build economic security. Illinois, Oregon and Washington have passed some form of workplace savings plans. About 25 states are considering similar legislation.
“People are 15 times more likely to save for retirement if they have an option to save at work,” said Sarah Mysiewicz Gill, an AARP senior legislative representative. She also serves on the Maryland commission, alongside pension and retirement plan specialists, lawmakers—including Rosapepe and Frick—and other experts.
Rosapepe and Frick introduced a bill to create the Maryland Secure Choice Retirement Savings Program earlier this year, after a task force identified the size of the savings crisis, but the bill did not make it to a vote.
The Maryland Chamber of Commerce has opposed the measure, calling it a burdensome mandate on employers.
The recently appointed commission, which also has the support of U.S. Labor Secretary Tom Perez, is intended to design a solution that could pass in the upcoming session, Rosapepe said. “We want to make this as easy as we can for employers,” he said.
DMS Inc. does payroll for businesses, and Racheff has done calculations on the cost to employers of implementing the program. He said it would be a one-time expense of less than $5 per employee.
“We’re far past the time where there is a need for this,” he said. “The graying tsunami of baby boomers is getting ready to retire.”
Christopher J. Gearon is a writer living in Derwood, MD.