House panel advances retirement savings program for private workers

The Alaska House Finance Committee heard testimony Friday on legislation that would create a state-facilitated retirement savings program for private sector workers whose employers do not offer retirement plans.

Senate Bill 21 would establish Alaska Work and Save, an automatic individual retirement account program that would enroll employees at a default contribution rate of 5 percent of their paycheck. The program would exempt businesses with five or fewer employees and those operating less than three years.

State Senator Bill Wielechowski, the bill's sponsor, said more than half of American households have no retirement savings at all, and 64 percent of small businesses in Alaska do not offer any retirement plan. He said the barrier is cost. Setting up a retirement program can cost a small business $4,800 to $17,000 per year.

"This is the state providing this option for small businesses at no cost to the businesses at all," Wielechowski said.

The program would allow Alaska to join a multi-state partnership to keep costs low. Seventeen other states have enacted similar legislation.

Marge Stoneking, advocacy director for AARP Alaska, told the committee that insufficient retirement savings leads to greater reliance on state-funded public assistance programs later in life. She said if the access gap is not addressed, Alaska could face $708 million in increased reliance on programs like SNAP and Medicaid through 2040.

She said if Alaska households saved an average additional $920 per year, just $75 per month, they could erase that projected public assistance burden and improve their own retirement security.

Stoneking urged the committee to restore compliance language for employers so that every eligible Alaskan worker has a chance at a secure retirement. She said states with compliance provisions in statute have seen faster program growth. Colorado's program took five months to hit 10,000 funded accounts, while Maryland's took 27 months. The key difference is that Colorado has compliance included in statute. Wielechowski said the bill's sponsors removed all penalties and fines to avoid being oppressive to small businesses, a tradeoff that has left the compliance mechanism weaker than advocates prefer.

Small business owners testified in support of the program. John Weddleton, who owns a retail business in Anchorage with 34 employees, said very few of his employees have ever thought about saving for retirement.

"This Work and Save, not only does it provide a really simple mechanism for saving, but it's also a reminder that they should be," Weddleton said. "You know, with every paycheck, it's like, hey, this is the thing, you need to pay attention to it."