LANSING – House Democrats today announced a plan that will offer 401(k)-style retirement plans to employees in small businesses, opening the door to a secure retirement for millions of Michigan workers.
"The men and women who work in small businesses help drive Michigan's economy, and they deserve a fair wage, health care and a secure retirement," House Speaker Andy Dillon (D-Redford Township) said. "Expanding 401(k)-style plans to small businesses will help attract talented workers to Michigan, create good-paying jobs and ensure every worker in our state can enjoy a secure retirement. It's good for our families and it's crucial to getting Michigan back on track."
Under the plan, the state will work with a private retirement investment planner to set up a 401(k)-style retirement plan and open it to all businesses, including those with as few as one employee. The private company will manage the retirement plan, much like the State of Michigan's own 401(k) plan. The businesses in the proposed plan can match employee contributions and the accounts will follow employees when they leave their jobs to work elsewhere in Michigan. The House Democrats' proposal is scheduled to get a hearing in committee this week.
"This proposal will help every Michigan worker save now for a stronger, more secure tomorrow," said Rep. Steve Bieda (D-Warren), the architect of the proposal. "Everyone who works in Michigan deserves to enjoy a good quality of life when they retire. Michigan is sending the message that no worker will be left behind in their golden years."
Currently, four in 10 workers say they aren't saving for retirement and 90 percent of Americans say they have financial concerns about their retirement. While a comfortable retirement requires 70 percent of pre-retirement income, Social Security provides only 40 percent of that income. [1]
The Office of Retirement Services estimates that about 2 million people will participate in the Democrats' plan. The only initial cost to the State is the estimated start-up cost of $559,000. The State will get the money back in five years through the plan.
Gov. Jennifer Granholm called for the retirement legislation in her 2006 State of the State address.
[1] Michigan Retirement report, Michigan Department of Treasury and Department of Management and Budget, 2006.