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New Retirement Savings Program to Help Minnesota Workers

Retirement Savings #2

Erik Forsberg, who owns or is a partner in five restaurants in Minneapolis and Stillwater, says it would be “almost impossible” to offer retirement savings plans to his roughly 200 employees.

“We run pretty narrow margins as it is, so for us to be able to provide a benefit like that long-term, it just simply is not in the cards for most small- and medium-sized restaurant groups,” he says. “It puts us at a pretty significant competitive disadvantage.”

But that may change in 2025, when Forsberg’s company begins participating in a new state-facilitated retirement savings program for private sector workers who don’t currently have access to one through their employers.

Gov. Tim Walz (D) in May signed legislation to create the Minnesota Secure Choice program, which will allow employees to contribute to an individual retirement account via automatic payroll deduction.

Under the law, Minnesota businessees with five or more employees that don’t offer a retirement plan will be required to enroll workers in Secure Choice unless an employee elects not to contribute. The program could begin operation as early as January 2025.

Increasing financial security

About 718,000 Minnesota private-sector workers lack access to a traditional pension or a retirement savings plan through their jobs, according to AARP Public Policy Institute research.

“We know that so many people, both in Minnesota and in the nation, are facing a retirement savings crisis,” says Mary Jo George, AARP Minnesota’s associate state director of advocacy. AARP Minnesota strongly supported the Secure Choice bill.

About a third of American workers have less than $25,000 in savings and investments, according to the nonprofit Employee Benefit Research Institute.

As of June 30, 2023, nine states have active state-facilitated retirement savings programs, with another 10 states working to implement one, according to Georgetown University’s Center for Retirement Initiatives.

Both younger and older workers will benefit from Minnesota’s program, says state Sen. Sandy Pappas (DFL-St. Paul), a lead sponsor of the Secure Choice bill.

“At any point that you start, it’s still going to be advantageous,” says Pappas, adding that the state investment board’s returns have averaged about 8 percent a year.

The Secure Choice legislation requires a board of directors to establish the default, minimum and maximum employee contribution rates. Workers will have the right to change their contributions or opt out of the program.

It also calls for education and outreach to businesses and employees, including working with nonprofits and other groups to reach worker populations across different cultures and languages.

Nicauris Heredia Rosario, legislative and policy director at the Minnesota Council on Latino Affairs, says that Secure Choice will particularly benefit people of color, including Latinos, about 46 percent of whom lack an employer retirement plan and who often earn lower wages.

“This program has the potential to increase financial literacy among our community,” Heredia Rosario says.

Mary Van Beusekom is a writer living in Minnesota.

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