From “Crain’s New York Business”: Retirement Security for Those Who Need it Most

More than half of private-sector workers in the New York metro area do not have a retirement plan.

Photo: Associated Press

Letitia James is the New York City public advocate.

Millions of working people across the country face the frightening prospect of aging into poverty rather than retiring with dignity.

The lack of retirement security for middle-class and low-wage workers is a growing crisis that Washington has refused to address, even though it demands immediate attention.

In the New York City metropolitan area, a staggering 60% of private-sector workers today are without access to any form of a retirement plan. That figure is alarming and unacceptable.

Instead of waiting for Washington to act, it’s time to address this crisis locally. Government, business, labor and local communities must work together to ensure that all workers can look forward to a dignified retirement.

Here’s how: New York’s private sector can replicate the most effective practices of the public pension system while reducing costs for employers. The key is pooling workers’ contributions into a single fund to lower administrative fees, reduce risks and achieve better returns than standard individualized 401(k) plans—all without costing taxpayers a dime.

The concept of pooling is absolutely crucial: Strength in numbers enables every individual worker to benefit from the total accumulated contributions of everyone who participates in the fund. In other words, workers help each other build savings and retirement security.

Businesses could easily enroll their employees in this pooled retirement plan through their existing payroll systems, the same way they enroll workers in Social Security. No administrative fees for the plan would be charged to businesses, so employers’ overall costs would be dramatically lower than what they currently pay for 401(k)’s, if that option is even available. This would save the average working couple an estimated $150,000 over a lifetime, according to a study by the independent research group Demos.

While fully honoring its fiduciary responsibilities, the new fund could also invest in infrastructure projects that directly create local jobs and boost our economy.

Businesses are likely to get on board quickly. According to a survey by the National Conference on Public Employee Retirement Systems (NCPERS), 82% of small businesses nationwide overwhelmingly support the concept of a new retirement plan modeled on the public pension system. In contrast, 401(k) plans carry exorbitant administrative costs and management fees that many small businesses simply cannot afford. They would prefer to contribute to a pooled fund.

NCPERS, the top trade association representing more than 500 U.S. pension funds, has put its full weight behind this effort.

Achieving retirement security for all is a realistic and necessary goal for New York City. And given the ongoing political paralysis in Washington, New York should lead the way in creating a pooled retirement fund for private-sector workers that other cities and states could adopt.

We’ve come together to advocate for this common-sense approach because whether you’re from government or the private sector, leaders can no longer sit on the sidelines while millions of New Yorkers face the frightening prospect of getting old without a safety net.

We urge businesses, labor unions and elected officials to join this effort to ensure that all working people, regardless of income level, can experience a stable and secure retirement.

We cannot let so many of our friends, family members and fellow New Yorkers become more economically vulnerable as they get older.

The time to act is now.

Letitia James is the New York City public advocate. Bill Samuels is the founder of EffectiveNY, a reform group that advocates for retirement security.

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