Program Could be Especially Beneficial for Workers in the “Gig Economy”
Albany, NY — A review of New York’s proposed Secure Choice Savings Program, a state-facilitated voluntary retirement savings account for private-sector employees, finds that the program would likely decrease the number of New Yorkers who do not have any retirement savings.
In surveying similar efforts in nine other states, the Rockefeller Institute review finds that the Secure Choice program is positioned for “substantial effectiveness and success” in helping more workers save for retirement in a rapidly changing private-sector workplace that provides fewer benefits and support mechanisms.
“With the rise of the gig economy, workers gain a lot of flexibility, but they also lose traditional support systems like employer-based retirement savings programs,” said Jim Malatras, president of the Rockefeller Institute. “Our review shows that the proposed Secure Choice Savings Program holds a lot of promise for encouraging more New Yorkers to invest in their futures as they navigate the necessities of employment today.”
The increasing number of private-sector workers who lack access to a retirement savings program is a sign of a general shift that is forcing state governments to reconsider how employee benefits should be managed in the future in order to encourage individual retirement savings and help avoid any looming crisis.
Independent contractors or contract workers are among the fastest growing sectors in the United States — now nearly 15 percent of the entire workforce. Ride-hailing companies such as Uber and Lyft, among the more prominent representatives of the “gig economy,” do not offer employees the same status as traditional public-sector or private-sector transportation companies, and do not have employer-offered benefits. Other core service functions in the private sector, like cleaning services and telecommunications, are also being contracted out by companies more than ever before, leaving many employees in those sectors without traditional access to employer-based benefits.
According to the AARP Public Policy Institute’s analysis of Census data, more than 3.5 million private-sector workers — more than half of all workers — in New York do not have a retirement plan through their workplace. More than 60 percent of those who lack coverage are younger individuals.
The New York State Secure Choice Savings Program was included in Governor Andrew M. Cuomo’s 2018 New York State Executive Budget to help alleviate this problem. It would offer several savings account options and create a main online portal marketplace for participating employees to use to manage their accounts. Participation in the Secure Choice program would be voluntary for employers as well as employees. If a private-sector employer decides to participate, its employees would be enrolled in a Roth IRA (individual retirement account) and automatic contributions from employees’ payroll checks would be established, though any employee can opt out either initially or at any time. Employers do not make contributions to employees’ retirement accounts, and all employees’ savings are portable, meaning they can take them from one job to the next.
In early 2018, both houses of the state legislature included modified versions of the program in their budget resolutions, so the concept has received broad and bipartisan support and appears well-positioned to be enacted in New York.