Fresh off a failed campaign for the Democrat nomination for president, New York City Mayor Bill de Blasio announced plans for a city-sponsored “universal retirement savings program” for Big Apple private-sector employees.
Currently, about one and a half million private-sector employees in New York City have no access to a retirement saving program through their employer, Hizzoner claimed.
“Over a million New Yorkers work their whole lives and have nothing to show for it,” de Blasio said at a retirement security rally on Monday. “Rather than work until the day they die, Universal Retirement Security will allow more New Yorkers to breathe a sigh of relief later in life and truly enjoy the years they’ve earned.”
Contributions would come from employees exclusively (rather than from employers or the City) and made through payroll.
Plan specifics
- Only 43% of working New Yorkers have access to a plan that can help them save for retirement. Those that do have access often face large fees, because they do not have the leverage provided by a collectively-pooled savings program.
- Even those who have started to save do not have much: 40% of New Yorkers between the ages of 50 and 64 have less than $10,000 saved for retirement.
The City’s proposal “would enable New Yorkers in the private sector to automatically enroll in an employee-funded retirement plan.”
- The plan would create an automatic-enrollment individual retirement account for employees at businesses that do not already have a program. Businesses that have a program could not drop their current plan to enroll in this one.
- Contributions would be based on a default rate; employees would have the ability to change their rate or opt-out of the program.
- Employees would be able to transfer the savings account from job to job.
- Consistent with ERISA eligibility, part-time workers who work at least 20 hours per week would be covered.
- In addition, the City would create a board to establish and oversee the management of the program, which will be launched by the end of 2021. The City would also undertake a robust outreach and education effort on the program.
- Through this program, an employee who makes $50,850 per year (the median wage for a job in New York City) and invests 5% annually while earning a conservative average net return of 4% would have saved $146,274 after 30 years.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
