Md. task force looks to move the ball on retirement savings

ANNAPOLIS — A legislative task force is looking at potential legislation that would create a system of retirement plans for employees of small businesses.

The idea is not new, but legislators now hope that expected changes in federal regulations will open the door to creating a plan, possibly a multiple-employer 401(k) style plan or state-managed pension system, that won’t burden small businesses or run afoul of federal laws on employee retirement benefits.

The panel hopes to resolve questions over the number of employees that would trigger a business to offer such plans as well as whether to require provisions for mandatory enrollment or to create a retirement plan exchange.

“We need a better market system for people who make $30,000 to $50,000,” Kathleen Kennedy Townsend, a member of the legislative task force, said Tuesday.

Kennedy Townsend previously chaired a separate panel created by former Gov. Martin J. O’Malley that found that about 1 million Maryland residents have no retirement savings. Nearly three-quarters of those earn less than $40,000 annually. Four in 10 work for employers that do not offer a pension plan. About half of the 1 million without retirement plans are minorities.

This is not the first time the state has attempted to tackle the issue. Bills attempting to create a retirement system for private-sector employees date back to 2006. Questions about state liability for plans it would manage or concerns about federal regulations governing retirement systems have derailed those attempts.

Michael C. Rubenstein, a legislative analyst, said those questions have never been resolved.

In the last two years, bills on the issue have died in House and Senate Committees. Those bills required employers with five or more employees either to offer a retirement plan or place their employees in a system managed by the state that would be similar to but separate from the state employees’ retirement system. Private-sector employers would be automatically enrolled with a mandatory 3 percent contribution but could opt out.

But legislator and opponents note that such laws mandating retirement plans or imposing automatic deductions could run afoul of federal laws.

U.S. Labor Secretary Tom Perez appeared with House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr. during an announcement creating the new legislative panel. He vowed that some changes to federal regulations were pending though he declined to offer specifics. Those regulatory changes could be proposed by the end of the year and implemented in 2016.

The legislative task force is expected to make recommendations by the end of the year. It is not clear how those recommendations would be affected should the federal regulatory changes not materialize by that time or if those proposed changes become entangled in litigation.

Only five states have enacted mandatory retirement savings laws. California and Massachusetts passed laws in 2012. Illinois, Oregon and Washington followed this year.

In California, Illinois and Oregon, the plans all include mandatory automatic enrollments, required contributions for employees of at least 3 percent, pooled plans and professional management, usually with an independent board.

Washington state’s system essentially creates a retirement plan exchange comparable to the health care exchanges set up under the Affordable Care Act.

But not all of these plans are up and running.

“There’s a lot of plumbing and wiring that states like Illinois and Oregon have to work out,” said Angela Antonelli, executive director of the Center for Retirement Initiatives at Georgetown University.

Seven other states, including Maryland, are studying the issue, and 12 others are considering bills to create such a program or to study the issue.

Any legislation, should it pass, will head to Gov. Larry Hogan, a Republican who has repeatedly said he opposes such mandates.

Last month, a spokesman reiterated concerns previously expressed by Hogan.

Douglass Mayer, a spokesman for the governor, said in September that Hogan remains concerned about retirement savings for Maryland residents.

“However, any measure that adds to our already bloated level of state government bureaucracy or increases the burdens on small businesses and taxpayers will be viewed with a very high level of skepticism. For years lawmakers have failed to properly manage the state employee pension system and it makes zero sense to create another state-run system,” Mayer said.