Work Hard, Die Poor: The Corporate Attack on Employee Pensions

By Lafer, Gordon | The Progressive, August-September 2017 | Go to article overview

Work Hard, Die Poor: The Corporate Attack on Employee Pensions


Lafer, Gordon, The Progressive


For the past decade, the nation's premier corporate lobbies have been engaged in a relentless, fifty-state legislative attack on public employee pensions. The leaders of this campaign claim to be motivated by how unfair it is that public employees have guaranteed pensions funded by private-sector taxpayers who enjoy no such benefits.

But are the corporate lobbies interested in helping long-suffering private-sector employees? Of course not.

This spring, Republican Congressional leaders and the corporate lobbies that back them were presented with the opportunity to provide low-wage, nonunion workers with some measure of the retirement security that public employees enjoy, at no cost to employers or taxpayers.

Five states--California, Oregon, Illinois, Connecticut, and Maryland--have now adopted legislation dubbed "Retirement Security for All" (RSA), which marks a first step toward providing for the retirement of those who work in the low-income private sector. Thus, RSA plans offer a significant increase in retirement security for nonunion, private-sector workers, without charging business or the public a dime. Employers just have to create an electronic payroll deduction so employees can contribute to the state-managed plan.

RSA plans enroll all such employees in a state-managed fund, supported by automatic payroll deductions equal to 3 percent of employee earnings. Individuals have the right to opt out at any point--but studies show that automatic enrollment will result in millions of people saving for retirement who would not otherwise set aside savings for a personal Individual Retirement Account.

At first blush, it's hard to imagine who could oppose this. Indeed, when the idea was first proposed in Pennsylvania in 2015, one Republican legislator termed it a "no brainer," asking "Who could be against it?"

But, in fact, such proposals have been the subject of concerted attack from the corporate lobbies. When Illinois adopted its plan, for instance, the Illinois Chamber of Commerce lashed out against the bill for imposing an "unnecessary mandate" and creating "competition with plans readily available in the private sector." And this past spring, the Trump White House joined with corporate-backed Congressional leadership to block any state from offering RSA.

All three of the nation's largest corporate lobbies--the U.S. Chamber of Commerce, National Association of Manufacturers, and National Federation of Independent Business--urged Congress to block the creation of RSA plans. The U.S. Chamber of Commerce insists that "the private sector should not be put in the position of having to compete with state governments to provide retirement benefits."

In other words, because a public option 401(k) would produce greater benefit at lower cost than privately managed funds, they must be prohibited. The Republican Congress--whose leadership has long been tied to the corporate lobbies--quickly took up this charge, with Senate Majority Leader Mitch McConnell explaining that such plans "undercut a system of private retirement savings....The end result would be more government at the expense of the private sector."

To block RSA, Republicans voiced an uncharacteristic demand for increased federal regulation of small businesses. Under the Employee Retirement Income Security Act (ERISA), employers offering 401(k) plans must keep extensive records documenting their stewardship of employee retirement funds. For small employers, the cost and burden of such record-keeping may prevent them from offering any plan at all.

But in RSA plans, employers have no control over employees' funds--they simply facilitate an electronic payroll contribution to the state-managed fund--and public pension funds are already subject to their own fiduciary regulations. For this reason, the Obama Administration exempted employers whose workers participate in RSA plans from the ERISA reporting requirements. …

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