A task force headed by Wisconsin’s state treasurer has recommended that Wisconsin establish a state-run program that provides a retirement benefit plan for employers that don’t offer one.
The task force, which was created by Wisconsin Gov. Tony Evers in 2019, issued a report outlining the causes of the state’s “retirement security crisis” and provided several recommendations it said would strengthen the financial security of Wisconsin’s retirees.
“Wisconsin is in trouble when it comes to retirement security,” the task force’s report began ominously. “Even before the COVID-19 pandemic, our retirement system was not working for a significant number of Wisconsin workers.”
The report cited a University of Wisconsin study that found that more than 400,000 seniors in the state will be in poverty by 2030, which it said will require Wisconsin to spend an additional $3.5 billion on public assistance programs.
“This trajectory provides a warning that today’s retirement system is not working for many Wisconsinites, and state action is essential,” the report said.
The task force said a major cause of the crisis is that Wisconsin’s aging population is above the national average. According to the report, there will be more than half a million additional seniors who are 65 or older living in Wisconsin between 2015 and 2030—an increase of nearly 60%. It also said that approximately 20% of households in the state with respondents 55 to 65 years old have a negative net worth of $20,660 with no retirement savings, and that 30% of senior households in the state are 200% below the federal poverty line.
“While Wisconsinites are living longer and life expectancies continue to grow, seniors will need additional savings, beyond Social Security, to cover costs,” the report said.
Among the task force’s recommendations is the creation of WisconsinSaves, a state-facilitated, privately managed automatic individual retirement account (IRA) program for workers who don’t have access to an employer-sponsored retirement plan. Eligible employers would need to register with the auto-IRA program, provide a basic employee roster of information to the program recordkeeper, and remit the employee contributions for each pay cycle. There would be no employer fees, contributions, or fiduciary responsibility.
In addition to WisconsinSaves, the task force provided four other recommendations it said would strengthen financial security and address the state’s retirement savings crisis:
Create incentives for auto-enrollment best practices to increase participation in workplace retirement plans by encouraging employers to require employees to opt out of the plans if they don’t want to participate, rather than requiring workers to proactively sign up for a plan.
Develop an emergency savings tool to ensure employees have a rainy-day fund.
Launch a “401(K)ids” program that would create an investment account for every child born in Wisconsin.
Construct an ecommerce web platform to serve as a centralized place for Wisconsinites to identify options available to save for retirement, while also learning more about good financial habits.
“A large number of our state’s residents are ill-prepared for retirement or an unexpected financial emergency,” according to the report. “This fact, coupled with a rapidly aging population, suggests that state program expenditures will rise significantly if nothing is done, and the impact of the COVID-19 pandemic has likely made the problem worse.”