Washington State, situated in the United States’ Pacific Northwest, has a problem: along with our entire nation, Washington faces a looming retirement savings gap.
Although much of the state is experiencing an economic boom, it is estimated that 52 percent of Washington State workers lack access to a workplace-based retirement savings option, across all business size categories. And in 2013, an estimated 88,800 Washington businesses with fewer than 100 employees didn’t offer retirement plans to full-time workers—that’s 65 percent of Washington’s small businesses.[ii] Businesses with fewer than 100 employees employ about 1.56 million workers in our state. Nationwide, 82 percent of small business owners agree that offering retirement benefits helps recruit good employees, and 73 percent say they feel a responsibility to provide some kind of retirement benefit.[iii] The trouble is, it’s too hard and too costly.
When I opened my Ben and Jerry’s and Zeeks Pizza restaurants in 2009 after working on Wall Street for 13 years, I was disappointed to learn that as a business owner I would be charged over $1,500 per year if I wanted to offer my staff a payroll deduction retirement savings option. This charge made it very obvious to me why so few small business owners provide this option for their staff.
The purpose of the Washington State Small Business Retirement Marketplace is to remove this annual fee for the small business owner. The financial services industry agreed to offer simple plans without the annual fee as long as the State of Washington became a partner in promoting the marketplace.
The marketplace removes barriers: no matter where an employee works, he or she will have the ability to have money taken out of his or her paycheck and deposited directly into a low-fee retirement vehicle. Given that one in six US residents retires into poverty, the marketplace will save the State of Washington money in the long run, as fewer people will be reliant on the state for public assistance when they retire.
Across the United States, states are developing strategies to close the savings gap. Ranging from employer mandates and state-run default plans to market-driven portals, there is no one prevailing model. And we can learn from some great global models—like New Zealand’s KiwiSaver and the United Kingdom’s National Employment Savings Trust (NEST), which gives users a way to navigate their workplace pension systems.
The marketplace will resemble each of these models in some ways, but ultimately it will be the first-of-its-kind state-based retirement savings exchange in the United States. The marketplace is expected to be fully operational in early 2017.
[i] Approximately 1.5 million workers in Washington State. Source: NIRS (National Institute of Retirement Security) 2012 estimate for Washington.
about the author
Mark Mullet represents the Fifth Legislative District in the Washington State Senate. He is the ranking member of the Financial Institutions and Insurance Committee. Before serving in the legislature, Mullet worked in international finance and served as an Issaquah City councilman. Currently, Mullet and his four daughters live in Issaquah, where he owns and operates two small businesses.