Wanted: A Savings Plan for Workers

By Tim Poor

Hank Krussel likes to think he does right by the eight people he employs at Hank’s Cheesecakes, an upscale shop in Richmond Heights, a St. Louis suburb. So a few years ago he began thinking about offering them some sort of retirement plan.

“I was just about to look into that before the recession hit,” he said. “Once that happened, there was really no extra money at all to put into anything.”

Business is better now, but it’s still hard for small businesses like Krussel’s to offer employees plans like the 401(k) accounts that many large companies have. “I’m willing to put in money, but if there’s a cost involved with setting it up, that’s certainly a deterrent,” he said.

AARP is encouraging states across the nation to make it easier for small businesses to set up retirement plans. Nearly 1 million Missouri workers don’t have access to a savings plan through employment. Businesses with fewer than 100 employees are much less likely to have a payroll-deduction savings program available for retirement.

“It’s more difficult for small businesses to get something like that going,” said Mary Timmel, the St. Louis-based Midwest outreach manager for the Small Business Majority, a national advocacy organization that is working with AARP on the issue.


Helping small businesses think bigger
Most small businesses would like to provide retirement savings options for their workers, said Jay Hardenbrook, AARP Missouri associate state director for advocacy.

“They want to provide it, but they just don’t really have the mechanisms to do it,” he said. “So the idea is to set up a way small businesses can go out and find accounts for employees at no cost to them.”

Workers with retirement plans through their job are more likely to save, especially if their employer makes payroll deductions available, studies have shown.

Hardenbrook is working with Missouri legislators to craft and sponsor legislation that would help, although specific provisions have not been determined. “We want to make it as easy as possible for small businesses,” he said.

That goal can be accomplished in a variety of ways, as shown by the three states that this year became the first to pass legislation to help create retirement plans:

• Illinois: A new law establishes individual retirement accounts (IRAs), funded through payroll deductions, for workers whose employers do not offer any other retirement savings vehicle. It requires businesses with 25 or more employees that have existed at least two years to participate, and allows those who fewer than 25 to do so as well. Employees can decide how much to contribute and select among investment options. Assets are pooled and professionallymanaged. Workers may opt out.
• Oregon: Workers whose employers choose the state-facilitated plan are automatically enrolled but have the right to opt out. Contributions come from payroll deductions, and workers can keep their accounts when changing jobs. The funds are pooled and professionally managed, and employers are not exposed to financial liability.
• Washington: Employers and the self-employed have access to a “marketplace” of private retirement plan options. Accounts are portable; participation is voluntary.

Timmel, whose group worked on behalf of the Illinois and Washington measures, said it is working with businesses nationwide to find out what fits best in each state. Business owners want flexibility,” she said. “We really try to look at what business owners are feeling in their states.”

In Missouri, about 44 percent of private-sector employees (972,000) work for an employer that doesn’t offer a retirement plan. That percentage is higher for businesses with fewer than 100 employees. Most of those without accounts earn less than $40,000 yearly, and more than 300,000 are ages 45 to 64.

Hank Krussel wants to help his employees get into a plan.

“I try to pay my employees a decent salary, but they need something besides Social Security.”
Tim Poor is a writer living in Clayton, Mo.