More than 2 million New Yorkers would be automatically enrolled in retirement savings plans under a bill touted by Mayor de Blasio on Monday.
“You should not have to work until you die. You should be able to enjoy the fruits of your labor,” he said in the City Hall Rotunda. “You should be able to have some time in your life where you retire in dignity.”
Under the plan, workers at every business in the city with 10 or more employees would be automatically enrolled in individual retirement plans, or IRAs, with a contribution rate of 3% of their salaries per paycheck.
The plan would apply to every worker above age 21, and businesses with fewer than 10 employees could sign up, too. The city is proposing Roth IRAs in which withdrawals are tax-free after retirement.
The mayor would appoint a panel to administer the accounts, while day-to-day operations will “likely” be run by a private third-party company, according to John Adler, director of the Mayor’s Office of Pensions & Investments.
Just over a third of of the city’s full-time workers, or 3,102,485 people, had retirement plans in 2017, according to a 2018 study by the New School for Social Research. And the rate of coverage is actually declining — from 36% in 2016 to 35% in 2017 in the city; and from 47% to 42% statewide.
“Because of the lack of coverage, we are going to face a crisis in the next 10 years,” New School Professor Teresa Ghilarducci, who co-authored the study, told the Daily News.
She applauded the legislation from Councilmen Daneek Miller (D-Queens) and Ben Kallos (D-Manhattan), saying, “It makes a huge difference” for both young and old workers.
Compound interest will enable young earners to save thousands in the long haul, she said, while older workers will have a cushion whenever the next recession hits.
The Council held a hearing on the legislation on Monday, with reps from AARP and the DC37 union of municipal employees attending.
States including California, Illinois, Maryland and Oregon, along with Seattle, have launched similar programs to the one de Blasio is advocating. Additional states and municipalities are trying to set up retirement savings programs even though President Trump in 2017 reversed a rule from his predecessor Barack Obama aimed at making it easier for them to do so.
“The Trump administration and the Republican Senate still don’t understand executive authority,” Kallos said. “Repealing regulations that provided guidance on how states and cities could establish retirement plans for private sector employees does not make following that advice illegal.”
The legislation comes after the city in 2014 required businesses to provide five days’ paid sick leave and as the administration is pushing for two weeks’ paid time off for all workers.
The retirement account proposal won’t come without even more costs to businesses, said Kathryn Wylde, president and CEO of Partnership for New York City, which represents more than 350 major employers.
“Anytime you set up a new benefits program there will be a cost, both to employers and also to the city,” she said, saying businesses will have to pay overhead and other costs.
“I think there’s consensus that there is a retirement savings crisis in the country,” she added. “The business community generally thinks it should be resolved at the federal level. Generally local initiatives end up with problems because they’re not portable.”