Rep. Evan P. Shanley (D-Dist. 24, Warwick) has introduced legislation to create a state-run retirement savings program for employees who do not have access to a retirement savings plan through work.
"Secure Choice is a way to give all workers access to a secure and affordable retirement savings plan," said Shanley. "Participation would be completely voluntary for employees, but it would allow whole groups of people to plan for their financial future, and it would develop a culture of financial literacy for people who have historically believed that they're in no position to save for retirement."
The legislation (2020-H 7461) would establish a public corporation that would act as an investment board for the retirement savings trust. It would also allow for the creation of IRA-type retirement investments managed by the investment board.
Under the terms of the bill, all eligible employees would be enrolled in the program unless the employee elects not to participate. An eligible employee may elect to opt out of the program by making a notation on an opt-out form. Any employer may choose to have a payroll deposit retirement savings arrangement to allow employee participation. The arrangement would gradually become mandatory, with various deadlines set for businesses depending on the number of employees.
Employers who already offer a retirement savings plan, such as a 401(k) would be exempt from the requirements of the retirement savings program.
Secure Choice automatically enrolls all full-time employees working for qualified businesses into a direct deduction retirement savings plan. These employees can choose any level of direct contribution they would like, including opting out of the program entirely. Unless otherwise stipulated by the employee, workers will have 3 percent of their paycheck automatically deducted into an IRA.
Employees who opt out of the program would still be able to join during open enrollment periods.
"It's not realistic to expect small business owners to establish a defined retirement savings plan for their employees when they're focused on ways to make their businesses grow," said Shanley in a statement. "Yet business owners are naturally worried about retirement security for their employees. This is a real need for many Rhode Islanders and the Secure Choice plan can meet this need.”