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Task force eyes mandating private sector retirement plans

A state panel appointed by Gov. Martin J. O’Malley could lead to recommendations that would make Maryland the first state in the country to mandate that private employers offer retirement plans or require those employees to join a state-run plan.

The 14-member task force, led by former Lt. Gov. Kathleen Kennedy Townsend, is scheduled to have its first meeting Thursday afternoon in Annapolis to study ways of increasing the number of private sector employees who save for their own retirement.

And while supporters and opponents of such plans agree that not enough people are saving adequately for their own retirements, there is a deep philosophical divide about the role of government in what some see as an individual choice.

“It’s a growing crisis both nationally and hear in Maryland,” said Sen. James C. Rosapepe, D-Prince George’s and Anne Arundel. “Too many people are not adequately saving for their own retirements and have to fall back on public assistance or the support of their children.”

Rosapepe was the sponsor of a bill earlier this year that would have required businesses in the state with at least five employees to offer access to a 401(k) or similar retirement plan or that they join a plan managed by the state.

That bill and similar legislation in the House died in committee.

O’Malley, who created the task force in a May executive order, stressed the need for such a task force and cited Bureau of Labor Statistics figures that show that only 49 percent of private sector employees participate in a retirement plan. Of those, only 16 percent are in a defined benefit plan similar to the state pension system.

Nationally, some studies have reported that as many 70 percent of employees who earn between $30,000 and $50,000 a year will participate in retirement plans if they are offered through their employer.

Hank H. Kim, executive director of the National Conference on Public Employees Retirement Systems, estimated that 1 million Maryland residents do not have access to employer-provided plans.

Sen. Joseph M. Getty, R-Baltimore and Carroll and a member of the task force, acknowledged the concerns around saving for retirement but said he had reservations.

“I’m concerned about the impact on small businesses in Maryland and whether or not this is the appropriate role of government,” said Getty, who was a member of the Budget and Taxation Committee that heard Rosapepe’s bill earlier this year. “Why should state government become the nanny state and force people to save. People should be able to set priorities based on where they are in life.”

Under the executive order, the task force is scheduled to deliver a report to the governor and legislative leaders by Dec. 4, but O’Malley can grant an extension until December 2015 if the panel does not think it can complete the work in four months.

Three other states, California, Connecticut and Oregon, are studying the issue.

This is not the first time Maryland has looked at the topic.

In 2007, the General Assembly requested state retirement officials study the creation of state-sponsored employee retirement accounts. That report found that the initial costs to the state, in 2007 dollars, could be as much as $3.5 million over the first seven years.

Additionally, the study by the Maryland Supplemental Retirement Plans said legislators could not legally “eliminate the risk of state liability which could occur because of administrative and fiduciary mistakes.”

California estimates it could cost $1 million to start up the program there, with annual operating expenses as high as $10 million. Administrative expenses for the Maryland State Retirement Agency are about $28 million, according to the Department of Legislative Services.