- State estimates say 700,000 to 900,000 Utah workers lack access to employer-provided retirement plans.
- A new bill would create a platform where small businesses would have access to retirement plans.
- Utah lawmakers prefer this plan to the mandates other states are implementing.
Hundreds of thousands of Utahns aren’t saving for retirement, according to state estimators, and one key reason is because many small business employees don’t have access to employer-provided retirement plans.
That puts stress on the individual but it also puts a burden on the state, because more and more older people in Utah are relying exclusively on Social Security to pay for their retirement needs.
And Rep. Joe Elison, R-Toquerville, said this retirement gap doesn’t only exist in Utah, but throughout the whole country.
“The challenge we’re all going to be facing is Social Security is going to be falling short. We’ve all been told that, and the challenge is, Americans as a whole, and specifically Utahns as a whole, are not saving enough money for retirement,” Elison said.
The representative is sponsoring a bill, HB250, that would help small business owners provide a way for their employees to save for retirement. Numbers shared by the state treasurer’s office estimate that around 700,000 to 900,000 workers in Utah do not have access to employer-sponsored retirement plans.
What is the issue?
Suzanne Millard, a Utahn who owns the company Ignite CMO, shared that small businesses have a hard time setting up retirement plans for their employees because they don’t have the same resources as larger companies.
She said she likes the bill because “it would allow employees of small businesses to be able to set up these retirement funds and still work for the small businesses and have something to retire on afterward.”
Rep. Jason Thompson, R-River Heights, who owns multiple businesses, acknowledges his own struggles with trying to set up retirement plans, saying that there are a number of barriers for small businesses, including cost, complexity and a lack of administrative support.
Another issue is that private providers of these retirement plans don’t come to small businesses because they don’t provide the same market incentive and revenue as large businesses do.
Nationally, 47% of private sector workers over 18 years old don’t have access to employer-provided retirement plans. In Utah, that number is 51%, studies show.
With so many people not saving up for retirement, Thompson said that eventually it will become expensive for the state, because when they retire, they will rely more on public resources. Pew Research shows that inadequate retirement savings in Utah could lead to over $1 billion in additional state spending through 2040 if changes aren’t made.
The lawmakers’ goal is to make sure that restaurant workers, construction employees and small-business staff members have the same basic opportunities to save for retirement as people who work for Fortune 500 companies.
What is the plan?
Elison and Thompson have worked with Utah State Treasurer Marlo Oaks to come up with a way to help fill the gap that doesn’t involve mandates.
HB250 would create the Utah Retirement Plan Exchange, a state-facilitated marketplace where private retirement providers can offer plans to employers in a single simplified platform.
“We envision this to be the national standard blueprint for red states,” Thompson said.
“It’s really for any state. I mean, it’s not just for red states,” Elison said, sharing that most of the solutions other states have come up with have involved mandates, and that is not something Utah wants to do.
According to Elison, this bill would provide a place for small businesses to have access to a company-sponsored plan or just a simple auto IRA plan.
He said this would make it so “employees can start salary deducting into their retirement savings program and start building net worth and wealth for their future.”
Use of this exchange is completely optional for each company.
“The idea is to address this area of the market that is not functioning. There really isn’t an active market that is providing a viable solution for small businesses, and so this bill is really designed to address that market failure,” Oaks said.
Not only have a number of states implemented their own mandates for small businesses to provide retirement plans, Oaks said that there is talk that there might be a federal mandate implemented.
“We don’t believe that’s the right approach for Utah. We want to make it easy for employers to provide an option,” Oaks said.
Over 90% of Utah’s businesses are small businesses, and 44% of Utah employees work for small businesses.
The bill would create one single exchange platform for small businesses and providers to come together. Oaks and his office would be responsible for creating this platform.
“The treasurer isn’t going to be managing assets. The state isn’t managing assets. The state isn’t sponsoring, you know, a plan,” Oaks said. “We’re really acting as a facilitator to bring private market actors together in a way that reduces barriers to entry and makes it easier for employers to help their employees save for retirement.”
How will this help Utahns?
The federal government recently implemented a treasury match of up to 50% on as much as $2,000 in annual retirement contributions per person, Oaks said. The problem is this cannot help people unless they have access to retirement savings in the first place.
Millard said that she believes this platform would help fill the gap and would help Utah’s small businesses better retain their employees.
“It will allow employees there to be able to help stay and grow the business without stressing about, you know, how am I going to retire in 30, 40, years?” she said.
Millard did express concerns about how businesses will be able to opt in or out of the program and the specifics of how it will function and be structured.
“It’s a good bill,” said Sen. Lincoln Fillmore, R-South Jordan.
He added that it will give incentives to companies to help their employees save for retirement, and it also doesn’t cost taxpayers any money.