ANNAPOLIS — Maryland legislators should create a mandatory pension system for private-sector employees, according to report issued by a task force created to study the issue.
A draft copy of the report obtained by The Daily Record makes a number of recommendations about the creation of a mandatory system that could be managed by the state and would apply to companies with five or more employees.
The report is part of the work done by the Task Force to Ensure Retirement Security for All Marylanders, led by former Lt. Gov. Kathleen Kennedy Townsend and Sen. James C. Rosapepe, D-Prince George’s and Anne Arundel counties.
Rosapepe said the report highlights concerns about 1 million Marylanders who he said do not have adequate retirement savings.
“The goal is to make it easier for them to have reliable retirement income,” Rosapepe said. “The major reason that 1 million Marylanders don’t have adequate retirement savings is that they don’t have access to it at work.”
But some business groups say the report is more of what they’ve opposed for the last two years.
“Marylanders should be saving for retirement,” said Jessica Cooper, state director for the National Federation of Independent Business. “There’s no argument on that. The government, however, should not be mandating it on the private sector. These plans already exist and are out there.”
A final version of the report is expected to be released during a news conference Tuesday, one day before the Senate Budget and Taxation Committee holds a hearing on a bill from Rosapepe.
Jim Racheff, chairman of Maryland Business, said many of the recommendations track with Rosapepe’s retirement legislation.
“The longer we let this problem fester the more likely it is we’ll see a larger swath of seniors depending on public assistance and programs through their retirement years,” said Racheff, whose organization of 300 small businesses statewide has supported the Rosapepe bill.
The report notes that a “tragic, but fortunately small, portion of Marylanders” does not save for retirement because they “are living hand-to-mouth and simply cannot afford to save.” The report adds that others can save more and “decide to defer some expenses today in order to have a better life tomorrow.”
The task force reported that the primary reason many do not plan for their own retirement “seems to be that — despite many retirement savings options — it’s a lot easier for people to spend money than to save it.”
Cooper questioned forcing the unemployed and low-wage workers into such plans.
“It’s going to hurt those people immediately,” said Cooper, who said it will also set up a vicious cycle that results in mandatory retirement savings driving more increases in the minimum wage to offset the contributions.
The report urges legislators to adopt a plan that requires all businesses to offer a professionally managed retirement savings plan or join a retirement pool that would be run by the state separate but similar to the retirement plan that covers state government employees.
Racheff said the recommendations affecting the self-employed and unemployed as well as the defined benefits are stretch goals.
Employees, under the recommendations and Rosapepe’s bill, would be automatically enrolled for a 3 percent payroll deduction. Workers would have to opt out of the plan. Employers would not be required to contribute but could do so voluntarily.
Additionally, the report calls for a plan that includes a defined benefit — a set payment that an employee can expect to receive throughout his or her retirement similar to plans offered to state employees. The defined benefit plan is an option favored by Kennedy Townsend but is not part of the Rosapepe legislation.
Rosapepe has sponsored similar bills the last two years that have died in committee. The legislation has been opposed by business groups who say the mandate will increase expenses for small businesses that are already overburdened with an ever-growing list of taxes and regulations.
“The next step is to act, and one way for the state to act is to pass (the bill),” Rosapepe said of his legislation and an identical bill filed in the House by Del. C. William Frick, D-Montgomery County.
“If we can pass the bill, great,” Rosapepe said. “If not, the problem still exists.”
The task force, created last year by then-Gov. Martin J. O’Malley, held a number of hearings during the summer and fall. The goal was to produce an initial report with the expectation that a second executive order would be issued mid-February that would allow the panel to continue its work.
That plan fell through when Gov. Larry Hogan, a Republican, was elected. Hogan, who has opposed the idea of mandatory retirement plans for private businesses, said in December that he would not issue the order extending the work of the commission.
Rosapepe said if the bill doesn’t pass he and Frick would likely ask House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr. to reconvene the task force on their own and allow it to continue its study.