AARP Eye Center
By Sheila Burke
When Tom Piech started exploring the idea of offering a 401(k) savings plan for employees of his family’s small, booming online business, he had no idea of the hurdles ahead.
The retired pharmacist from Livingston, 67, was familiar with such retirement plans because he’d invested in one himself. But providing one to the 30 workers at Value Pet Supplies was a whole different ballgame.
“It took about two years, and I found that it is a very complex endeavor and fraught with thorny compliance issues for small businesses,” Piech said. “And it’s expensive.” He was eventually able to offer a plan to his workers, but statistics show that many small businesses in the state don’t.
That’s why AARP Tennessee’s top legislative priority this year is to urge passage of a bill making it easier for smaller businesses to offer retirement savings accounts for their employees.
“Currently, 1 million Tennesseans do not have access to retirement savings through their workplace,” said Rebecca Kelly, state director of AARP Tennessee. She cited surveys showing that workers are 15 times more likely to save if they can do so through automatic payroll deduction.
AARP will push for legislation allowing the state to establish an IRA-type retirement savings program for small businesses. The plan would be voluntary for employer and employee. AARP will be working with legislators on the best design for such a program.
The concept of a voluntary retirement savings account is popular and has bipartisan support, Kelly said. Surveys show it has wide backing.
An AARP survey of Tennessee voters ages 18 to 64 indicated that 87 percent think that state lawmakers should support a retirement savings option.
Another survey of small-business owners showed that 79 percent of them believe that a savings program provides a competitive edge when recruiting employees.
Several states have passed laws enacting retirement savings programs, including Oregon, Illinois, California, Maryland and Connecticut.
Geoff Sanzenbacher, associate director of research at Boston College’s Center for Retirement Research, said states are hoping they will save money in the long run if residents have savings to lean on and don’t have to rely on social safety nets.
The statistics are sobering on the number of people who are unprepared for retirement. About a third of those ages 55 to 64 don’t have any money put away for retirement, Sanzenbacher said.
Workers could shop for their own savings plan, but many find that too difficult.
“For a lot of people, it’s intimidating to start an IRA,” Sanzenbacher said. “What provider should you pick? Which funds should you invest in? Is it worth the cost? So most people just don’t do it.”
Piech, a congressional district leader for AARP, is now retired from the family business. He wishes he’d had the option of a state-facilitated savings program for his own workers.
“Had this been available years ago when we were looking to begin our program, we would have seriously considered it,” he said.
Sheila Burke is a writer living in Nashville.