Commissioned Motivation on Pensions
Here’s a curious mid-summer press release:
Fewer and fewer workers are approaching retirement age with a comfortable amount of savings, either through traditional defined benefit pension plans or other savings accounts.
Some 49 percent of Rhode Island employers do not offer retirement benefits to their full-time workers (which mirrors national figures) and only 19 percent offer such plans to their part-time employees.
Lack of pension coverage is a problem that disproportionately affects lower-income workers, for whom it is harder to find the money to save for retirement. Also part of the picture is that, in today’s economy, workers frequently switch jobs and, since they have to wait some time before qualifying for a pension plan in their workplace, they may be ineligible for pension coverage for much of their adult working career.
One potential solution is a Universal Voluntary Retirement Account, which is a state-administered defined contribution account that is available for small employers to offer their employees. While such an account would be administered by the state, the management of the accounts would be assumed by a third-party provider chosen through a request for proposals (RFP) process.
What is the gap to be filled, here? Financial backing (i.e., the availability of taxpayer dollars when things go wrong)? Organizational focus (i.e., companies can’t profit by administering such a plan)? Surely companies that would bid to manage the plan would make more of a profit if they administered it, too. I’m just not seeing what the state government can do, in this case, that a private organization couldn’t do, and if private organizations won’t do it, perhaps there’s a reason.
I can, however, imagine two possible unspoken motivations, one good one bad: Creating such a retirement system would give the state somewhere to roll public pensions once the chimera of solvent “defined benefit” programs is acknowledged as such. It’s conceivable, too, that creating another pool of money over which the government has some authority would present further opportunity to exchange IOUs for cash.