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Retirement anxiety looms large in Michigan, with many residents having no access to a savings plan at work, leaving them wondering whether they’ll have enough money to live comfortably as they age.
A state-facilitated retirement savings program for businesses could help close some of the gaps between what workers need and what they have in the bank — but it will take legislation in Lansing to see it happen.
AARP Michigan, which has advocated for such a program for several years, and other advocates say the current legislative session is when it might happen. They’re pushing for a bill to be introduced to establish such a program.
“Small businesses recognize there is a retirement savings crisis in Michigan, and they want lawmakers to take action,” says AARP Michigan Director Paula Cunningham.
Workers can opt in or out
The concept is simple: The state creates a program that includes an IRA for workers, and it partners with a private company or companies to manage funds. Employees choose how much money from their paychecks, if any, they want to contribute.
As of 2020, nearly 42 percent of Michigan’s private-sector workforce ages 18 to 64 lacked access to a retirement savings plan at work, according to AARP research. The smaller the employer, the worse the access.
Anyone can walk into a bank and open a retirement account, but research shows people generally don’t, Cunningham says. Encouraging a savings habit at work — where participation is more likely — makes sense for individuals, who need to build retirement security, and for the state, which could see a reduction in the number of people tapping public assistance programs, she says.
Employers with an existing program can choose to keep theirs or opt in to the state option.
The nation’s first state-facilitated “work-and-save” programs launched in 2017. By June 2023, 19 states had passed some version of such a program, according to the Georgetown University Center for Retirement Initiatives.
In May and June, Michigan’s Lt. Gov. Garlin Gilchrist (D) and Treasurer Rachael Eubanks met with business leaders across the state to discuss crafting a smart retirement security policy.
Survey: Support for option
AARP hosted listening sessions, and in April and May it conducted a survey of small business owners who had 150 or fewer employees.
Nearly 6 in 10 of those surveyed didn’t offer a retirement plan, saying doing so was too complicated, expensive or time-consuming. More than 80 percent agreed “strongly” or “somewhat” that lawmakers should back a new state-facilitated option.
“I think that would be a big asset,” says Bob Solomon, 82, who has owned various small businesses over the years. After 16 years owning a True Value hardware store in the north-central Michigan community of Higgins Lake, Solomon decided this year to pay for a private 401(k) plan — in part to keep his crew of four employees around.
Dawn Arbuckle, 45, employs three to five people at her God’s Little Blessings Day Care in Pinconning, north of Saginaw. She’d like to offer a plan but says it’s too expensive — especially after giving raises to keep up with competition from other employers.
The Michigan Chamber of Commerce hasn’t taken a position on a state-facilitated program. The Small Business Association of Michigan is receptive. Each offers a multiple-employer 401(k) plan to small business members.
“We at SBAM oppose employer mandates, but we do see many potential options that we could get behind,” says organization President and CEO Brian Calley.
AARP prefers an automatic IRA, with all eligible employees registered for payroll deduction unless they opt out. The extent to which employers would be able to opt in or opt out will likely be the toughest negotiating point, says Lisa Dedden Cooper, AARP Michigan’s advocacy manager.
“We want it to be helpful for business, not harmful,” she adds. “This would be a win for workers, for businesses and taxpayers too.”
Sarah Hollander, a freelance writer and former daily newspaper reporter in Cleveland, has written for the AARP Bulletin for 15 years.
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